Introduction

Commercial insolvencies are expected to steadily increase in the near-term due to higher interest rates, supply chain disruption and corresponding increased commodity costs. A rise in commercial insolvencies will increase the likelihood that businesses will be impacted by a formal insolvency proceeding, whether as a creditor, supplier, customer or other stakeholder. It is, therefore, important for businesses to understand how to strategize in the context of both newly initiated and ongoing insolvency proceedings.

Commercial insolvencies are expected to steadily increase in the near-term due to higher interest rates, supply chain disruption and corresponding increased commodity costs. A rise in commercial insolvencies will increase the likelihood that businesses will be impacted by a formal insolvency proceeding, whether as a creditor, supplier, customer or other stakeholder. It is, therefore, important for businesses to understand how to strategize in the context of both newly initiated and ongoing insolvency proceedings.

In contrast to a case under Chapter 11 of the Bankruptcy Code, which centralizes a company’s debt adjustment efforts in the U.S. and provides for expansive oversight and supervision by a U.S. court, a Chapter 15 recognition proceeding is an ancillary proceeding in which the U.S. court acknowledges the foreign proceeding and gives it effect under applicable U.S. law.

The Delaware Court of Chancery’s recent opinion in Cygnus Opportunity Fund LLC et al. v. Washington Prime Group LLC et al. presents a veritable grab bag of potential blog posts, from a suggestion that an officer of an Limited Liability Company could be contractually bound by an LLC Agreement he never signed to the interesting interplay (and potential conflict) between an officer’s duty of obedience to the LLC’s board and the officer’s duty of disclosure to investors.

Le 27 avril 2023, le projet de loi C-228, Loi sur la protection des pensions (« LPP ») a reçu la sanction royale et est entré en vigueur au Canada. Comme la LPP vient modifier considérablement le traitement des exigences au titre des régimes de retraite dans le cadre des procédures d’insolvabilité, il y a lieu pour les prêteurs de veiller à bien comprendre la nature et les répercussions de cette loi.

On March 22, 2023, the U.S. District Court for the Eastern District of Virginia (Court) granted the Federal Energy Regulatory Commission’s (FERC) Motion for Default Judgment and entered a default judgment against Powhatan Energy Fund, LLC (Powhatan Energy Fund). The Court awarded FERC $3,465,108 in disgorgement and $16,800,000 in civil penalties.

The bankruptcy court presiding over the Chapter 11 cases of digital asset platform Celsius Network LLC and its affiliates (Celsius) issued a key ruling on January 4, 2023 (the Decision), by concluding that a significant portion of digital assets held in Celsius’ customer accounts are property of the debtors’ estates, and holders of such accounts accordingly are unsecured creditors.

Summary

In the recent case of Re Unity Group Holdings International Limited [2022] HKCFI 3419, the Hong Kong Court of First Instance sanctioned a scheme of arrangement between Unity Group Holdings International Limited and its creditors. This case confirms that the guarantor’s scheme can discharge debts owed by principal obligors who are members of the same group.

Commercial insolvency can affect stakeholders located in multiple jurisdictions and possessing diverse legal rights. A recent notable trend in Canadian insolvency law is the centralization in insolvency proceedings, where courts have recognized that an effective restructuring of an insolvent business may depend on the centralization of stakeholder claims in a single proceeding. This applies even when such an approach would be inconsistent with the parties’ contractual rights, statutory laws or Canada’s federal structure outside of the insolvency context.