On June 27, the U.S. Supreme Court announced a 5-4 decision rejecting the nonconsensual releases of the Sackler family in the Purdue Pharma bankruptcy case. The split is an interesting alignment of Justices: Gorsuch writing the majority opinion, joined by Thomas, Alito, Barrett and Jackson; Kavanaugh for the dissent, joined by Roberts, Sotomayor and Kagan.

Deal structure matters, particularly in bankruptcy. The Third Circuit recently ruled that a creditor’s right to future royalty payments in a non-executory contract could be discharged in the counterparty-debtor’s bankruptcy. The decision highlights the importance of properly structuring M&A, earn-out, and royalty-based transactions to ensure creditors receive the benefit of their bargain — even (or especially) if their counterparty later encounters financial distress.

Background

Chapter 11 bankruptcy has long been thought of as anathema to commercial real estate (CRE) lenders. This is due to the debtor-friendly bankruptcy forum, particularly with respect to (i) the up to 18 month exclusivity period during which only the debtor could propose a plan of reorganization and (ii) threats of a "cram-down" plan used to lever concessions from lenders. These provisions can be, and often were, abused by debtors with no real rehabilitative intent using bankruptcy only as a leverage tool.

In early February, a Delaware bankruptcy judge set new precedent by granting a creditors’ committee derivative standing to pursue breach of fiduciary duty claims against a Delaware LLC’s members and officers. At least three prior Delaware Bankruptcy Court decisions had held that creditors were barred from pursuing such derivative claims by operation of Delaware state law, specifically under the Delaware Limited Liability Company Act (the “DLLCA”).

A Massachusetts Bankruptcy Court’s recent appellate decision in Blumsack v. Harrington (In re Blumsack) leaves the door open for those employed in the cannabis industry to seek bankruptcy relief where certain conditions are met.

It is a rare occasion that one can be assured with certainty that, if they file a motion with a bankruptcy court, it will be granted. But, in the Third Circuit, that is exactly what will happen if a creditor or other party in interest moves for an examiner to be appointed under Section 1104(c) of the Bankruptcy Code. Once considered to be within the discretion of a bankruptcy court “as is appropriate,” the appointment of an examiner is now guaranteed if the statutory predicates are fulfilled according to the Third Circuit Court of Appeals.

By a notification dated 14 June 2023 (read here), the Ministry of Corporate Affairs has exempted petroleum assets leased by a company undergoing insolvency proceedings from the moratorium provisions of the Insolvency and Bankruptcy Code, 2016.

The Ministry of Corporate Affairs by notification dated 03 October 2023 (read here) exempted transactions, arrangements or agreements relating to aircraft, aircraft engines, airframes and helicopters under the Cape Town Convention and Protocol from the moratorium provisions of the Insolvency and Bankruptcy Code, 2016.

Executive Summary

In a radical departure from settled case law, the English High Court has eroded the protections of English law creditors guaranteed by the Rule in Gibbs¹ .

On 18 September 2023, the Insolvency and Bankruptcy Board of India (IBBI) introduced the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2023 (CIRP Amendment Regulations). Here is a summary of the key changes made through these regulations: