We take a look at the reforms to the EC Insolvency Regulation in light of the European Parliament’s 4 February vote on the committee of legal affairs’ report on the proposed reforms.

The background

Can a debtor be found to be balance sheet or cash flow insolvent even though its obligations are limited (in terms of creditor recourse) to the available assets? This was the question facing the High Court in Re ARM Asset Backed Securities SA [2013] EWCH 3351.

The background

In recent years, bankruptcy courts have come closer to reaching a consensus regarding their ability to recharacterize debt into equity. Yet, beneath this consensus lies a deepening divide that lenders should be aware of. Recharacterization challenges “the assertion of a debt against the bankruptcy estate on the ground that the ‘loaned’ capital was actually an equity investment.” In re Insilco Techs., Inc., 480 F.3d 212, 217 (3d Cir. 2007) (internal citations omitted).

The context - validity of appointment of administrators

The appointment of administrators under a charge prevents a company’s directors from exercising any management powers without the administrator’s consent.
However, the charge must be enforceable at the time of the administrators’ appointment. What happens if the directors dispute that the charge was enforceable? Are they prevented from controlling the company to reject the appointment.

The background

IPs are always on guard for potential conversion claims - but what happens when no title can be established? Euromex clarifies the whole mess.

The background

Whenever there is an apparent monetary debt, common practice is for a claimant to threaten a winding up petition as part of the tactics to get a potential defendant to pay up. Three weeks after a statutory demand letter is sent where an apparent debt for £750 or more exists, a winding up petition can be issued against a company which has not paid (the actual financial wellbeing of the payer is irrelevant as long as they have not paid). Whenever an apparent debt is in dispute this can be a powerful tool to unsettle a defendant.

Following insolvency, creditors and the (now insolvent) company can claim back losses from directors who breached their duties prior to the business breaking down. But it is not just formal directors – it is any individuals who actually control the company and have made themselves ‘shadow directors’ by doing so. In this way, creditors can recoup funds to meet the company’s debts from the individual directors who caused the loss of such funds.

The High Court has confirmed that all rights relating to the control of data belonging to, or being controlled by, a company at the time it entered into liquidation remain vested in the company at and following its liquidation. Liquidators are therefore not personally liable for compliance with the Data Protection Act 1998 in respect of this data as they will be viewed as agents acting for the company rather than as 'data controllers'.

Bankruptcy is intended to provide a fresh start and discharge outstanding debt.  But some debt is not dischargeable in bankruptcy.  A Virginia bankruptcy court held last week that a judgment against the debtor for intentional trade secret misappropriation is not dischargeable.

The recent decision of Re Bluecrest Mercantile BV saw the High Court stay proceedings for summary judgment in respect of contract debts to allow the formulation of proposals for a scheme of arrangement - is this likely to be become common practice, or is it a one-off?

The background