In October 2022, the English High Court delivered a long-awaited judgment1 relating to whether or not certain Bankruptcy Events of Default can be cured under the ISDA 2002 and 1992 Master Agreements ("ISDA Master Agreements") - resolving an issue relating to the suspensory effect of conditions precedent to payments and performance under ISDA Master Agreements raised in the English Court of Appeal earlier in the Lehman administration.
After much anticipation, the UK Supreme Court has handed down its judgment in BTI 2014 LLC v Sequana S.A. [2022] UKSC 25 - and has authoritatively set the baseline for how directors’ duties evolve as regards shareholders and creditors’ interests when a company is in the zone of insolvency.
Background
The Grand Court of the Cayman Islands (Kawaley J) handed down a recent decision appointing receivers over a segregated portfolio, in the case of In the Matter of Green Asia Restructure Fund SPC[1].
As the UK teeters on the brink of what would appear to be an inevitable recession, new restructuring tools introduced in the UK in 2020 pursuant to the Corporate Insolvency & Governance Act 2020 (“CIGA”) will ensure that issuers and other distressed borrowers can execute more creative and aggressive restructuring strategies than were possible during previous market downturns. A brief summary of the new UK restructuring plan is set out below, together with some examples as to how the restructuring plan is being used in practice.
What is the so-called "creditor duty"?
This is the duty, introduced into English common law by the leading case of West Mercia Safetywear v Dodd1 in 1988, of company directors to consider, or act in accordance with, the interests of the company's creditors when the company becomes insolvent, or when it approaches, or is at real risk of insolvency.
Background
Where a company's liquidation is necessary, deciding who or where is best placed to administer an orderly wind down for the benefit of creditors can be difficult: the shortfall of assets in an insolvency will highlight jurisdictional differences in approach as to questions of priority, frequently territorial rather than universalist.
The full strength of the economic headwinds facing the UK economy is not yet clear, but a helpful recent report by insolvency and restructuring adviser Begbies Traynor provided some useful numbers around the attitudes of businesses.
As another Irish Court year will soon commence, now is an opportune time to look back at some of the more interesting insolvency and restructuring judgments to have been delivered in the Superior Courts during the last 12 months.
The judgments explored below will prove of relevance and importance to practitioners and clients navigating distressed corporates and assets over the coming weeks and years. Please do get in touch with your Walkers Ireland Insolvency and Dispute Resolution contact or any of the contacts listed below with any comments or queries.
The U.S. Court of Appeals for the First Circuit recently ruled in the Puerto Rico bankruptcy case that Fifth Amendment takings claims cannot be discharged or impaired by a bankruptcy plan. As a matter of first impression in that circuit, the Court disagreed with the Ninth Circuit and held that former property owners affected by prepetition takings must be paid in full.
In re Fin. Oversight & Mgmt. Bd., 41 F.4th 29 (1st Cir. 2022)
In a recent decision, the Court of Appeals for the Fifth Circuit held that an agreement between a debtor, a surety, and third-party beneficiaries was not an executory contract and, thus, was ineligible to pass-through the bankruptcy unaffected. The Fifth Circuit, however, adopted a modified Countryman test for muti-party executory contracts. Matter of Falcon V, L.L.C., 2022 WL 3274174 (5th Cir. 2022).
Background