“…[B]ecause Congress has not clearly abrogated the solvent-debtor exception,” the U.S. Court of Appeals for the Fifth Circuit held that a reorganized solvent debtor had to “pay what it promised now that it is financially capable.” In re Ultra Petroleum Corp., 2022 WL 8025329, *1, (5th Cir. Oct. 14, 2022) (2-1). Moreover, “given [the debtor’s ] solvency, post-petition interest is to be calculated according to the agreed-upon … contractual default rate …,” not the “much lower Federal Judgment Rate . . .,” held the court. Id.
The Supreme Court has handed down its long-awaited judgment in BTI 2014 LLC v Sequana SA [2022] UKSC 25.
Basic facts
The Third Circuit recently affirmed a bankruptcy court’s denial of a defendant’s motion to disqualify the plaintiff’s law firm in a large adversary proceeding, holding that it had not abused its discretion because the plaintiff law firm (W) had “complied with” American Bar Association Model Rule of Professional Conduct 1.10(a)(2). In re Maxus Energy Corp., 2022 WL 4113656, *4 (3d Cir. Sept. 9, 2022). According to the court, a lawyer (B) who “moved from” the defendant’s law firm “to the [plaintiff’s] firm” was not cause for W (the new firm) to be disqualified.
The appellate courts have been busy explaining or clarifying preference and fraudulent transfer law. Although novices may think the Bankruptcy Code (Code) is clear on its face, imaginative counsel have found gaps in the statute and generated rafts of litigation since the Code's enactment in 1979. Recent appellate decisions, summarized below, show that courts are still making new law or refining prior case law.
Preferences
“Under the long-standing ‘solvent-debtor exception,’ plaintiffs [unsecured trade creditors] possess an equitable right to receive post-petition interest at the contractual or default state law rate, subject to any other equitable considerations, before [the debtor] collects surplus value from the bankruptcy estate,” held the Ninth Circuit on Aug. 29, 2022. In re PG&E Corporation, 2022 WL 3712498, *4 (9th Cir. Aug. 29, 2022) (2-1).
In the latest edition of Going concerns, Stephenson Harwood's restructuring and insolvency team covers the use of lock-up agreements in schemes of arrangements, and the developments in Singapore and Hong Kong as regards recognition of foreign insolvencies. Our final article is a must-read for lenders, discussing the circumstances under which security may be unwound as a undervalued transaction.
Content
The defendant "was a `mere conduit' of [a] fraudulent transfer and cannot be liable to the bankruptcy estate for funds she never knew about," held the U.S. Court of Appeals for the Second Circuit on May 5, 2022. In re BICOM N.Y., LLC, 2022 WL 1419997 (2d Cir. May 5, 2022). Affirming the lower courts' granting of summary judgement to the defendant transferee, the court refused to "equate ...
The Third Circuit recently affirmed the bankruptcy court's approved retention of the debtor's counsel ("S") when that "law firm dropped an existing client to avoid conflicts that would prevent it from taking on a more lucrative client [i.e., the debtor]." In re Boy Scouts of America, 2022 WL 1634643, *7 (3d Cir. May 24, 2022) (BSA). According to the court, there were "not enough facts to put [the so-called "hot potato" doctrine] into play" and disqualify S under the Rules of Professional Conduct. Id.
Hong Kong’s insolvency regime is based mainly on that of the United Kingdom. The legislation concerning corporate insolvency is contained largely in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) (“CWUMPO”) and the Companies (Winding-up) Rules. The corporate insolvency and winding up provisions in the legislation are broadly based on the Companies Act 1929 and the Companies Act 1948 of the UK. The last major amendment of those provisions was made in 2016.
A guide to restructuring and insolvency issues and procedures in Hong Kong
Contents
Seahawk China Dynamic Fund [2022] HKCFI 1994 (date of reasons for decision: 4 July 2022)
Introduction