The Bottom Line
The enacted Corporate Insolvency and Governance Act (the Act) introduces three permanent reforms to the existing insolvency legislation and certain temporary measures designed to address the immediate impact of COVID-19 on UK businesses. Among other things, the Act looks to maximise the potential for struggling companies to be maintained as a going concern. As market participants and the courts get to grips with the new legislation, it is clear that there will be some impact on the special situations landscape and the business of stressed and distressed investment.
The Bottom Line
The Bottom Line
Recently, in In re Dura Automotive Systems, No. 19-12378 (Bankr. D. Del. June 9, 2020), the Bankruptcy Court for the District of Delaware held that granting the Official Committee of Unsecured Creditors (the Committee) derivative standing on behalf of the debtors – a Delaware limited liability company – was precluded by the Delaware Limited Liability Company Act (the Delaware LLC Act).
What Happened?
Permanent Reforms
Moratorium: a new stand-alone moratorium to provide businesses with an initial 20-business-day stay from creditor action.
Historically, the interests of landlords whose commercial real estate is occupied by debtors in Chapter 11 proceedings have been generally well protected. Indeed, Section 365(d)(3) of the Bankruptcy Code requires the debtor to timely perform all of its post-petition obligations under its nonresidential leases of real property — most important among those, rent.
The US Court of Appeals for the Sixth Circuit affirmed that a state court’s finding of “willful and malicious injury” in connection with the misappropriation of trade secrets entitled the plaintiff, in the defendant’s subsequent bankruptcy proceeding, to summary judgment of nondischargeability on collateral estoppel grounds. In re Hill, Case No. 19-5861 (6th Cir. May 4, 2020) (Donald, J.).
The Bottom Line
In Lariat Cos. v. Wigley(In re Wigley), Case No. 18-3489 (8th Cir. March 9, 2020), the Eighth Circuit held that a claim against Debtor B that arose out of a fraudulent transfer made by Debtor A to Debtor B was subject to the statutory cap applicable to lease rejection damages where Debtor A’s underlying liability was premised on its breach of a lease.
What Happened?
“Bankruptcy is about financial death and financial rebirth. Bankruptcy is the great American story rewritten. We’re a nation of debtors.” -Elizabeth Warren
Amid the Coronavirus (COVID-19) pandemic and related economic turmoil, bankruptcy filings in the United States are on the rise. Non-US insurers should review contractual arrangements with US insureds and brokers, and establish a plan to deal with bankruptcy filings across the United States in a consistent fashion.