Introduction
The high street is experiencing a rash of administrations, but could regulators fix the mess?
In The Sun Also Rises, Ernest Hemingway neatly summed up how bankruptcy happens. It occurs two ways: “Gradually. Then suddenly.” The British retail landscape has seen a flurry of such calamities. Thomas Cook, House of Fraser, L.K.Bennett, Debenhams, Links of London, Goals Soccer Centres, Mothercare and Jack Wills all struggled for periods before collapsing into various forms of administration.
A New Jersey District Court recently addressed several issues in connection with the appointment of a future claims representative (“FCR”). In light of the recent increase in mass-tort bankruptcy cases, exploring these issues is timely.
Background
In But Ka Chon v Interactive Brokers LLC [2019] HKCA 873, the Hong Kong Court of Appeal upheld a lower court's decision to reject an application to set aside a statutory demand. The appellant had argued (among other things) that an arbitration clause in his agreement with the respondent required their dispute to be referred to arbitration.
Background
Following various disputes as to the scope of the collateral given to secured creditors, the debtors and certain of their noteholders jointly proposed a chapter 11. The plan included a rights offering that the consenting noteholders agreed to backstop. These consenting noteholders were granted the right to purchase significant equity of the reorganized debtors at a discount and receive significant premiums for their agreement to backstop the rights offering and support the plan.
On 11 July 2019, HMRC published its summary of responses to its “protecting your taxes in insolvency” consultation.
Following the consultation, the government will legislate in the Finance Bill 2019-20 to make HMRC a secondary preferential creditor for certain tax debts paid by employees and taxpayers. This change is intended to ensure that when a business enters insolvency, more of the taxes paid in good faith by employees and taxpayers go to the Exchequer, rather than being distributed to other creditors. Draft legislation and an explanatory note is also available.
On 11 July 2019, HMRC published a policy paper discussing measures which are aimed at those taxpayers who “unfairly seek to reduce their tax bill by misusing the insolvency of companies”. This will be achieved by making directors and other persons connected to those companies jointly and severally liable for the avoidance, evasion or “phoenixism” debts of the corporate entity.
An explanatory note and draft legislation set out the conditions that must be satisfied in order to enable an authorised HMRC officer to issue a “joint liability notice” to an individual.
A recent decision out of the District Court for the Southern District of New York may bring greater certainty to the interpretation of what constitutes a “financial institution” in connection with the safe harbor in section 546(e) of the bankruptcy code. The decision, In re Tribune Fraudulent Conveyance Litig., 2019 U.S. Dist. Lexis 69081 (S.D.N.Y. Apr.