On January 25, Judge Peck of the U.S. Bankruptcy Court for the Southern District of New York entered a declaratory judgment in favor of Lehman Brothers Special Financing Inc. (LBSF) in a case examining a collateralized debt obligation (CDO) transaction and concerning the effect of event of default provisions on the payment priorities of LBSF as swap counterparty under certain swap agreements and the holders of certain credit-linked synthetic portfolio notes. The payment waterfalls (Priority Provisions) of most CDO transactions give priority to swap counterparties over noteholders.

In the current economic climate, disputes, particularly payment disputes, are rife. Consider the following scenario. You arrive at work early on Monday morning, to discover that the supplier with whom you have been having a long-running but relatively minor dispute over payment, has secured a winding up order against your company and appointment of a liquidator from the court. Or, equally distressing, a sheriff officer appears at your door with another form of court order in his hand - an interdict - stopping you from carrying out a key part of your business activities.

A commercial landlord should never assume that, if his tenant goes into administration or liquidation, he will not be able to obtain rent from the administrator or liquidator in respect of the period following appointment of the administrator or liquidator.

One of the more interesting recent appointments in which MacRoberts have been acting relates to the administration of Livingston Football Club Limited ("Livingston") where we acted for Donnie McGruther of Mazars. Donnie was interim manager and subsequently administrator of Livingston.

In a recent interesting Scottish case, HSBC Bank plc, Re an Order to wind up Kirkbride Investment Limited [2009 Scot CS CSOH 147], the Court of Session granted an application to wind up an overseas company and appoint Joint Provisional Liquidators. The company, registered in Gibraltar, was involved in property development in Scotland with the secured lending provided by the Bank.

The Facts

The Commodity Futures Trading Commission is proposing to amend its Bankruptcy Rules to permit the trustee for a bankrupt futures commission merchant to continue to operate the business of the commodity broker in the ordinary course for a limited period of time.

The Office of Fair Trading ("OFT") has announced that it will conduct a review of the corporate insolvency market in the UK. Its aim is to assess the level of competition in the UK market and ensure that the market itself is working well for consumers.

On 23 November a new form of diligence will be created which allows creditors to seize money belonging to a debtor in satisfaction of a debt.

In principle, all assets owned by a debtor should be susceptible to enforcement of a debt. But at present, creditors are unable to take diligence against cash owned by a debtor. To rectify this anomaly, a special category of diligence - money attachment - has been introduced by Part 8 of the Bankruptcy and Diligence etc. (Scotland) Act 2007.

When can a money attachment be used?

Some of the customers of Farepak, the failed Christmas hamper company that went into liquidation with BDO Stoy Hayward some three years ago, will apparently soon receive their first dividend cheques out of the insolvency. Perhaps even in time for Christmas 2009!

The High Court in England has made an interesting decision in the case of ED Games Limited. A director of that company procured that it did not pay VAT for a period prior to its liquidation and in that period, the net deficit on the company's balance sheet increased. The High Court has held that the director could be held personally liable for the increase in such net deficit.