The United States Supreme Court has agreed to address “[w]hether, under §365 of the Bankruptcy Code, a debtor-licensor’s ‘rejection’ of a license agreement—which ‘constitutes a breach of such contract,’ 11 U.S.C. §365(g)—terminates rights of the licensee that would survive the licensor’s breach under applicable nonbankruptcy law.” The appeal arises from a First Circuit decision, Mission Prod. Holdings, Inc. v.

As part of its toolkit to improve rescue opportunities for financially-distressed companies, the Government has announced that:

"Companies will be supported through a rescue process by the introduction of new rules to prevent suppliers terminating contracts solely by virtue of a company entering an insolvency process."

The right to terminate contracts on this basis is already restricted for supplies of essential utilities and IT services. However, this only affects quite a narrow range of suppliers.

Amid all the usual politics of the Government’s Budget this week, one seemingly low-key change might be of considerable interest to lenders and insolvency practitioners. The Chancellor announced that from 6 April 2020 HMRC will once again benefit from a Crown preference.

The Government has announced that it will legislate to prohibit the enforcement of certain contractual termination clauses ('ipso facto clauses').

As with other aspects of the response to recent insolvency and corporate governance consultations, this has given us pause for thought.

The Government has published its response and action plan following its consultation in March this year on reforming the UK’s corporate governance landscape in the context of insolvent companies.

In its original consultation, the Government put forward various proposals to deal with perceived deficiencies in the management of troubled companies that may be leading to poorer outcomes for creditors, employees and other stakeholders.

In March 2018, the Department for Business, Energy and Industrial Strategy (BEIS) published a consultation on proposed reforms to the UK’s insolvency and corporate governance landscape. That consultation included certain significant proposals, including extending liability to the directors of holding companies that sell insolvent subsidiaries.

The global M&A market has remained strong from the end of 2017 into 2018, with the total deals announced in the first half of 2018 making it the best period for global M&A yet. With stockholders pressuring larger companies to grow their revenues and the strong liquidity position of many companies, it is a sellers’ market.

A recent Ninth Circuit Court of Appeals decision provides insight into “bad faith” claims-buying activity; specifically whether a creditor’s purchase of claims for the express purpose of blocking plan confirmation is permissible. In In re Fagerdala USA-Lompoc, Inc., the Court found it was—the secured creditor did not act in bad faith when it purchased a subset of all general unsecured claims and voted those claims against confirmation because it was acting to further its own economic interest as a creditor, without some extrinsic ulterior motive.

It is not unusual for a creditor of a debtor to cry foul that a non-debtor affiliate has substantial assets, but has not joined the bankruptcy. In some cases, the creditor may assert that even though its claim, on its face, is solely against the debtor, the debtor and the non-debtor conducted business as a single unit, or that the debtor indicated that the assets of the non-debtor were available to satisfy claims. In these circumstances, the creditor would like nothing more than to drag that asset-rich non-debtor into the bankruptcy to satisfy its claims. Is that possible?

The High Court has found that two directors and one former director of a company were in breach of their duties by causing the company to implement a reorganisation and a capital reduction when they were aware there was a risk it would lose its source of income.

In addition, the statutory statement of solvency supporting the capital reduction was invalid because the director had not formed the opinion set out in it. As a result, the capital reduction and a subsequent dividend were unlawful, and the directors were liable to repay the dividend.

What happened?