In our update this month we take a look at some of the recent cases that will be of interest to those involved in insolvency litigation. These include:

In an insolvency, the three heads of set-off (contractual, legal and equitable) each represent a powerful means of effectively jumping the queue and circumventing the ordinary priority scheme between a company's secured and unsecured creditors.

The new housing administration regime for registered providers of social housing is now in force. Our latest Insight introduces the new legislation and highlights some of the key ways in which a housing administration will differ from a normal administration process.

The appellate courts are usually the last stop for parties in business bankruptcy cases. The courts issued at least three provocative, if not questionable, decisions in the past six months. Their decisions have not only created uncertainty, but will also generate further litigation over reorganization plan manipulation, arbitration of routine bankruptcy disputes and the treatment of trademark licenses in reorganization cases. Each decision apparently disposes of routine issues in business cases. A closer look at each case, though, reveals the sad truth: they are anything but routine.

A bankruptcy court properly denied a bank's motion to compel arbitration of a debtor's asserted violation of the court's discharge injunction, the U.S. Court of Appeals for the Second Circuit held on March 7, 2018. In re Anderson, 2018 U.S. App. LEXIS 5703, 20 (2d Cir. Mar. 7, 2018). Finding a purported "inherent conflict between arbitration of [the debtor's] claim and the Bankruptcy Code," the Second Circuit reasoned that the bankruptcy court "properly considered the conflicting policies in accordance with law." Id., quoting In re United States Lines, Inc., 197 F.3d 631, 641 (2d Cir.

“ . . . [A] bankruptcy court may not designate claims for bad faith simply because (1) a creditor offers to purchase only a subset of available claims in order to block a [reorganization] plan . . . and/or

“Federal law does not prevent a bona fide shareholder from exercising its right to vote against a bankruptcy petition just because it is also an unsecured creditor,” held the U.S. Court of Appeals for the Fifth Circuit on May 22, 2018. In re Franchise Services of North America Inc., 2018 WL 2325909, *1 (5th Cir. May 22, 2018). According to the court, applicable Delaware law would not “nullify the shareholder’s right to vote against the bankruptcy petition.” Id.

Relevance

The Court of Appeal considers 'reasonable adjustment' in the context of possession proceedings

The first case in which the Equalities legislation has been raised as a defence to a mortgagee's claim for possession has recently been before the Court of Appeal.

In our update this month we take a look at some of the recent cases that will be of interest to those involved in insolvency litigation. These include;

In the final part of this series, we look at how you can protect your position and be prepared in the event of an impending insolvency.

Thinking ahead

It is always prudent to assess insolvency risk before finalising a contract. The trading history and financial position of a company should be carefully reviewed and a financial risk assessment made at both the outset and during the lifetime of a project. Obtain an up to date set of accounts and a credit report before entering into your contract to enable you to assess the counterparty's financial viability.