The restructuring of financially distressed companies is on the increase globally. In line with this international trend is Chapter 6 of the Companies Act, No 71 of 2008 (Act) which introduced business rescue into the South African corporate landscape.
Although business rescue has brought a much needed and long overdue alternative to liquidation for businesses in distress, it is also responsible for many points of contention. The most pertinent of these is currently the general moratorium found in s133 of the Act.
On February 17, the Federal Deposit Insurance Corporation (FDIC) approved a proposal for recordkeeping requirements for FDIC-insured institutions with a large number of deposit accounts to facilitate rapid payment of insured deposits to customers if those institutions were to fail. The proposed rule would apply to insured depository institutions with more than 2 million deposit accounts. Under the proposal, these institutions would generally be required to maintain complete and accurate data on each depositor.
On January 21, the Federal Deposit Insurance Corporation (FDIC) announced that it was seeking comment on a revised proposed rule that would amend the way small banks are assessed for deposit insurance. The proposed rule would affect banks with less than $10 billion in assets that have been insured by the FDIC for at least five years.
A federal appeals court in Illinois held that Bank of New York Mellon Corporation and Bank of New York (collectively, “BNYM”) were on “inquiry notice” that Sentinel Management Group, Inc. improperly used customer funds as collateral for a loan prior to the firm’s collapse in August 2007. (Sentinel was an investment management firm registered with the Commodity Futures Trading Commission as a futures commission merchant that claimed it specialized in short-term cash management for hedge funds, individuals, financial institutions and other FCMs.
Twenty-one major global banks have already signed a relaunched stay protocol developed by the International Swap Dealers Association and other leading industry organizations in coordination with the Financial Stability Board. The purpose of the protocol is to help ensure the orderly resolution of a troubled bank by having firms voluntarily agree to abide by foreign resolution regimes in connection with cross-border transactions. A prior protocol was signed by 18 major banks in November 2014. The relaunched protocol increases the types of covered financial contracts.
The South African Revenue Service (SARS) released Binding Private Ruling 210 (Ruling) on 11 November 2015. The Ruling sets out the tax consequences of a ‘liquidation distribution’, as defined in s47(1)(a) of the Income Tax Act, No 58 of 1962 (Act), followed by an ‘amalgamation transaction’ as contemplated in s44(1)(a) of the Act.
A federal judge in New York – the Hon. Richard J. Sullivan – mostly granted JP Morgan Chase Bank’s motion to dismiss claims brought on behalf of unsecured creditors of Lehman Brothers Holdings Inc. related to JPM’s requirement that Lehman Brothers Inc., LBH’s broker-dealer subsidiary, pledge and post extra collateral in September 2008, shortly before LBI filed for bankruptcy protection on September 15, 2008.
The Trustee for the Liquidation of MF Global Inc. – the defunct futures commission merchant that filed for bankruptcy in October 2011 – received approval from the US Bankruptcy Court overseeing its dissolution to make a final, cumulative 95 percent distribution on all allowed general unsecured creditor claims.
The commercial landscape in South Africa was forever changed when business rescue was introduced by Chapter 6 of the Companies Act, No 71 of 2008 (Act).
The proverbial "blind leading the blind" comes to mind when one recalls the great uncertainty which existed, and to an extent still exists, in the minds of business owners, creditors, employees and even business rescue practitioners as to the meaning of certain of the provisions of Chapter 6 of the Act.
Unsecured general creditors of defunct MF Global, Inc. (other than those of its parent company MF Global Holdings Ltd.) will receive a final payment from the firm, giving them a total recovery of 95 percent of their approved claims, under a proposal made last week by the overseers of the liquidation of the firm and its parent company.