Recent high-profile contractor collapses have made many acutely aware of the need to ensure they are adequately protected in the event of employer or contractor insolvency. This increase in insolvencies has also placed significant stress on the construction bond market. Contractor insolvencies put pressure on surety bond providers, which in turn can lead to increased rates and more stringent criteria being imposed on contractors seeking bonds.

Welcome to our guide on navigating legal procedures in Ontario. Whether you're a local business or a foreign entity operating in the province, understanding the legal landscape is essential for protecting your interests.

The complexities of litigation and debt collection can be daunting, but with the right insights and preparation, you can confidently manage these challenges. Let's explore the essentials.

Understanding the basics

Deal structure matters, particularly in bankruptcy. The Third Circuit recently ruled that a creditor’s right to future royalty payments in a non-executory contract could be discharged in the counterparty-debtor’s bankruptcy. The decision highlights the importance of properly structuring M&A, earn-out, and royalty-based transactions to ensure creditors receive the benefit of their bargain — even (or especially) if their counterparty later encounters financial distress.

Background

In a long-running dispute arising out of a failure to supply gas, the English Commercial Court recently ordered that a prime London commercial property be transferred to the award creditor in part-satisfaction of a USD 2.6 billion arbitration award. In this article, we explore the case of Crescent Gas Corporation Ltd v National Iranian Oil Company & Anor [2024] EWHC 835 (Comm) and look at how the Insolvency Act was used to support enforcement of the award.

In early February, a Delaware bankruptcy judge set new precedent by granting a creditors’ committee derivative standing to pursue breach of fiduciary duty claims against a Delaware LLC’s members and officers. At least three prior Delaware Bankruptcy Court decisions had held that creditors were barred from pursuing such derivative claims by operation of Delaware state law, specifically under the Delaware Limited Liability Company Act (the “DLLCA”).

A Massachusetts Bankruptcy Court’s recent appellate decision in Blumsack v. Harrington (In re Blumsack) leaves the door open for those employed in the cannabis industry to seek bankruptcy relief where certain conditions are met.

Occasionally an invoice slips through the net and does not get paid, or payment is delayed due to issues with the goods or services being provided.

Where the debt is for £750 or more, an impatient creditor may serve a statutory demand or a winding up petition if it considers there to be no reason for the delay.

If this happens, deal with the situation immediately as the consequences of failing to do so can be very damaging to the company's reputation and finances; even if it is not ultimately wound up.

With the increase in global trade and business, often involving complex corporate structures in multiple jurisdictions, we expect to see a significant increase in cross-border insolvency and restructuring matters in coming years. This is especially the case with rapid advancements in technology and digital change driving “borderless” transactions and investments in every industry.

It is a rare occasion that one can be assured with certainty that, if they file a motion with a bankruptcy court, it will be granted. But, in the Third Circuit, that is exactly what will happen if a creditor or other party in interest moves for an examiner to be appointed under Section 1104(c) of the Bankruptcy Code. Once considered to be within the discretion of a bankruptcy court “as is appropriate,” the appointment of an examiner is now guaranteed if the statutory predicates are fulfilled according to the Third Circuit Court of Appeals.

Over the decade since the implementation of the costs reforms proposed in Lord Jackson's Review of Civil Litigation Costs, lawyers and litigants have become accustomed to the courts actively managing the costs of disputes with a value up to £10 million. But the court also retains a discretion to apply the costs management regime in cases even above this level.