In Stream TV Networks, Inc. v. SeeCubic, Inc., the Delaware Supreme Court reversed the Delaware Court of Chancery’s finding that the board of Stream TV Networks, Inc. (Stream) could sell all of Stream’s assets without a stockholder vote due to Stream’s insolvency. The Delaware Supreme Court found that the sale agreement – in essence, a privately structured foreclosure transaction – constituted an “asset transfer” under Stream’s charter, triggering a class vote provision that required the approval of Stream’s Class B stockholders.

In In re Rehabilitation of Scottish Re (U.S.), Inc., C.A. No. 2019-0175-JTL (Del. Ch. Apr.18, 2022), the Delaware Court of Chancery ruled, as a matter of first impression, that in a delinquency proceeding for an insurance company under Delaware law, there is no per se requirement that a rehabilitation plan meet a “liquidation standard” to obtain court approval. Under the “liquidation standard,” a rehabilitation plan must provide claimants at least “liquidation value,” or the value they would have received in a liquidation proceeding.

The Hong Kong court has sanctioned a scheme of arrangement for a Hong Kong-listed, Bermuda-incorporated fertilizer manufacturer based in the mainland. In doing so, the Honorable Mr Justice Harris also warned holders of U.S. denominated debt that where they use offshore schemes of arrangement, they run the risk of individual creditors presenting winding-up petitions in Hong Kong. The view has however been queried in recent U.S. authority.

The Hong Kong court has confirmed that – going forward – the court is ready to recognize and assist a foreign insolvency process conducted in the company’s center of main interests (COMI) and that it will no longer be necessary for the foreign insolvency process to be carried out in a company’s place of incorporation. The judgment sets out a practical roadmap for the future of cross-border insolvency in Hong Kong, where listed companies that use complex holding company structures find themselves in difficulty.

The quarterly UK insolvency statistics (covering April to June 2022 inclusive) were released on 2 August 2022. They show that there has been an 81% rise in company insolvencies in England and Wales when compared with the same quarter in 2021, with the total number of company insolvencies in Q2 being the highest since Q3 2009. Significantly, creditors’ voluntary liquidations soared to 4,908, the highest number since the records started in 1960. The number of insolvencies look set to remain high for some time yet, given the difficult economic climate.

In a previous alert, we covered the Delaware Chancery Court’s decision in Stream TV Networks last year.

The most innovative features of the new Insolvency Code include, among others: (i) the introduction of safeguard obligations aimed at detecting corporate distress and promoting the adoption of restructuring tools at an early stage; (ii) a more favourable approach to procedures allowing for business continuation on a going concern basis, as opposed to those leading to liquidation of the company; and (iii) specific provisions concerning the insolvency / restructuring of company groups.

Introduction

The Court of First Instance held in Re Up Energy Development Group Limited [2022] HKCFI 1329 that where the three core requirements for winding-up a foreign company under section 327(1) of the Companies (Winding up and Miscellaneous Provisions) Ordinance (Cap. 32) (CWUMPO) are satisfied, the mere fact that the foreign company has been ordered to be wound up by the court in its place of incorporation is not a ground for the Hong Kong court to decline the making of a winding up order.

A former listco

Judgment has been reserved on the sanction of Houst Ltd’s restructuring plan at a hearing held in front of Zacaroli J on Friday morning (15 July 2022), while the company gathers the further valuation information requested by the court. If sanctioned, the plan will be the first use of the restructuring plan by an SME, and will involve a “cram” of HMRC notwithstanding the tax authority’s secondary preferential creditor status.

The proposed plan

On July 5, 2022, cryptocurrency brokerage Voyager Digital filed for chapter 11 in the Southern District of New York Bankruptcy Court, citing a short-term “run on the bank” due to the “crypto winter” in the cryptocurrency industry generally and the default of a significant loan made to a third party as the reasons for its filing. At Voyager’s first day hearing on July 8, 2022, the Bankruptcy Court asked the critical question of whether the crypto assets on Voyager’s platform were property of the estate or its customers.