As the Courts have often stated, in bankruptcy and insolvency law, time is of the essence. Bankruptcy and insolvency legislation allows the Court to craft orders with the specific aim of shielding a Receiver against frivolous actions, such that the Receiver may complete his task of managing property while enforcing the rights of a secured creditor in a timely fashion. The HRH Hotels Ltd. case is one such example where the Court ruled that a plaintiff's claim against the Receiver was frivolous and constituted a collateral attack on the Receivership process.

The recent decision in Iona Contractors Ltd. v. Guarantee Company of North America, 2015 ABCA 240 [Iona] (PDF) (leave to appeal to the Supreme Court of Canada denied) clarifies the law regarding provincial statutory trusts in the insolvency context.

In a 5-2 decision, the Supreme Court of the United States in Commonwealth of Puerto Rico et al. v. Franklin California Tax-Free Trust et al., 579 U.S. ___ (2016), rejected the Puerto Rico Public Corporation Debt Enforcement and Recovery Act (the “Recovery Act”) as preempted by the Bankruptcy Code on June 13, 2016. The practical implication of the decision is that Puerto Rico is currently without options to restructure its billions of dollars in municipal debt, and the only feasible path forward will most likely have to come from Congress.

The Board of Governors of the U.S. Federal Reserve System (Board) recently proposed a rule (Proposed Rule) that will impact parties to any "qualified financial contract" (QFC), as described below, with a global systemically important banking organization (GSIB) or a GSIB affiliate (together, a covered entity). The Proposed Rule will eliminate certain contractual rights with respect to the QFC when:

the covered entity counterparty is placed in a Federal Deposit Insurance Corporation (FDIC) receivership; or

Addressing a novel issue in In re: International Oil Trading Company, LLC, 548 B.R. 825 (Bankr. S.D. Fla. 2016), the United States Bankruptcy Court for the Southern District of Florida recently denied in part an involuntary debtor’s motion to compel production of communications between the judgment creditor who had filed the involuntary bankruptcy petition and the petitioner’s litigation funder. The Court found that the attorney-client privilege and work product protection were applicable to certain disclosures made to the litigation funder, a non-lawyer third-party.

Essentially all securitization structures utilize a bankruptcy remote entity, a/k/a special purpose entity (“SPE”), to reduce the lenders’ or investors’ exposure to a bankruptcy of the sponsor. A standard feature of SPEs is the appointment of an independent person (director, member, manager) to the body managing the SPEs. That independent person’s consent is required for “major decisions,” one of which is the filing of, or consenting to a bankruptcy of the SPE (hence the court’s reference to them as “blocking directors”).

You know, there’s never a dull moment when one reports on the regulatory states’ endless and so often fruitless and wrong-headed tinkering with the global economy. So now… let’s talk bail-in.

A recent decision by the U.S. Court of Appeals for the Second Circuit, In re Tribune Company Fraudulent Conveyance Litigation,¹ represents a significant victory for shareholders who may get cashed out in connection with a leveraged transaction that precedes a company bankruptcy.

SEC and FDIC Propose Dodd-Frank Broker-Dealer Resolution Rules

Two recent court decisions may affect an equity sponsor’s options when deciding whether and how to put money into - or take money out of - a portfolio company. The first may expand the scope of “inequitable conduct” that, in certain Chapter 11 settings, could lead a court to equitably subordinate a loan made by a sponsor to its portfolio company, placing the loan behind all of the company’s other debt in the payment queue. The second decision muddies the waters of precedent under the U.S. Bankruptcy Code on the issue of the avoidability of non-U.S.