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Transforming the insolvency sector: The Constitutional Court has the last word

This brief alert is a follow-up to our previous article published on 1 February 2017, on the SCA judgment and is aimed at reporting on the Constitutional Court judgment.

The Policy

South Africa, Insolvency & Restructuring, Cliffe Dekker Hofmeyr, Constitutional court
The cloud of doubt no longer hanging over doubtful debts?

Following on from our previous tax alerts regarding the various proposed amendments pursuant to the draft Taxation Laws Amendment Bill, 2018 (draft TLAB) published for public comment on 17 July 2018, we discuss in this Tax Alert another significant proposed legislative amendment, specifically related to the allowance for doubtful debts set out in s11(j) of the Income Tax Act, No 58 of 1962 (Act). 

South Africa, Insolvency & Restructuring, Litigation, Tax, Cliffe Dekker Hofmeyr, South African Revenue Service
Delaware Bankruptcy Court Finds Anti-Assignment Clauses in Debt Documents Enforceable in Claim Objection Fight with Postpetition Debt Purchaser

On June 20, 2018, Judge Kevin J. Carey of the United States Bankruptcy Court for the District of Delaware sustained an objection to a proof of claim filed by a postpetition debt purchaser premised on anti-assignment clauses contained in transferred promissory notes. In re Woodbridge Group of Companies, LLC, et al., No. 17-12560, at *14 (jointly administered) (Bankr. D. Del. Jun. 20, 2018).

USA, Delaware, Insolvency & Restructuring, Litigation, Paul, Weiss, Rifkind, Wharton & Garrison LLP
The Ninth Circuit Vacates Bankruptcy Court’s Designation Order, Holding That Purchasing a Subset of Available Claims to Block a Plan, Absent An Ulterior Motive, Does Not Constitute Bad Faith

Summary

USA, Insolvency & Restructuring, Litigation, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Ninth Circuit
Connecticut Bankruptcy Court Holds That Trademark Licensee Does Not Automatically Lose the Right to Use Trademarks When Debtor-Licensor Rejects License, Siding with Seventh Circuit in Circuit Split

The United States Bankruptcy Court for the District of Connecticut recently examined a question at the heart of an existing circuit split regarding the consequences of trademark license rejection in bankruptcy: can a trademark licensee retain the use of a licensed trademark post-rejection? In re SIMA International, Inc., 2018 WL 2293705 (Bankr. D. Conn. May 17, 2018).

USA, Insolvency & Restructuring, Litigation, Trademarks, Paul, Weiss, Rifkind, Wharton & Garrison LLP
Some clarity on what constitutes a “class” of creditors in a section 155 compromise

The Gauteng Division of the High Court recently delivered a judgment in the matter of The Commissioner for the South African Revenue Service and Logikal Consulting (Pty) Ltd and Others, Case No. 96768/2016, in which the court had to interpret, among other things, what comprises a “class” of creditors as contemplated in s155(2) of the Companies Act, No 71 of 2008.

South Africa, Insolvency & Restructuring, Litigation, Tax, Cliffe Dekker Hofmeyr, South African Revenue Service, Insolvency Act 1986 (UK), High Court of Justice (England & Wales)
Preferred or not preferred - the super preferent status of a business rescue practitioner in subsequent liquidation proceedings

The Supreme Court of Appeal provided clarity in Diener N.O. v Minister of Justice & Others (926/2016) regarding the ranking of the business rescue practitioner’s (BRP) claim for remuneration and expenses. The SCA also clarified whether such claim was conferred a “super preference” over all creditors, secured and unsecured in subsequent liquidation proceedings.

South Africa, Insolvency & Restructuring, Litigation, Cliffe Dekker Hofmeyr, Liquidation, Unsecured creditor, Companies Act
Remuneration of business rescue practitioners - the requirement to prove claims against the insolvent estate

 A recent development in the ever-evolving jurisprudence associated with business rescue proceedings relates to the remuneration of the business rescue practitioner in the event that a business rescue fails. The Supreme Court of Appeal in Diener N.O. v Minister of Justice (926/2016) [2017] ZASCA 180 has recently confirmed that the practitioner’s fees do not hold a ‘super preference’ in a liquidation scenario and the practitioner is required to prove a claim against the insolvent estate like all other creditors.

South Africa, Insolvency & Restructuring, Litigation, Cliffe Dekker Hofmeyr, Liquidation
Remuneration of business rescue practitioners - the requirement to prove claims against the insolvent estate

A recent development in the ever-evolving jurisprudence associated with business rescue proceedings relates to the remuneration of the business rescue practitioner in the event that a business rescue fails. The Supreme Court of Appeal in Diener N.O. v Minister of Justice (926/2016) [2017] ZASCA 180 has recently confirmed that the practitioner’s fees do not hold a ‘super preference’ in a liquidation scenario and the practitioner is required to prove a claim against the insolvent estate like all other creditors. 

South Africa, Insolvency & Restructuring, Litigation, Cliffe Dekker Hofmeyr, Liquidation, Unsecured creditor, South Africa Supreme Court of Appeal
Supreme Court Holds That Presence of Financial Conduits Does Not Trigger “Safe Harbor” Protection for Securities-Related Transfers Under Section 546(e) of the Bankruptcy Code

On February 27, 2018, the United States Supreme Court resolved a circuit split regarding the proper application of the safe harbor set forth in section 546(e) of the Bankruptcy Code, a provision that prohibits the avoidance of a transfer if the transfer was made in connection with a securities contract and made by or to (or for the benefit of) certain qualified entities, including a financial institution.

USA, Insolvency & Restructuring, Litigation, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Supreme Court of the United States