“Without these [mediated] settlements, there is no Plan.”

• From Opinion on Plan confirmation, In re Boy Scouts of America, Case No. 20-10343, Delaware Bankruptcy Court, Doc. 10136, at 80 (issued July 29, 2022).

The Boy Scouts of America bankruptcy has achieved a milestone: on July 29, 2022, the Bankruptcy Court issues a 281-page Opinion on confirmation of Debtor’s Plan of Reorganization. The Opinion is generally favorable toward Plan confirmation but identifies a number of issues remaining to be resolved.

“[T]he bankruptcy court— . . . (2) shall excuse compliance . . . if . . . an assignee for the benefit of the debtor’s creditors . . . was appointed or took possession more than 120 days before the date of the filing of the petition, unless . . . necessary to prevent fraud or injustice.”

11 U.S.C. § 543(d)(2) (emphasis added).[Fn. 1]

On August 15, 2022, the Tenth Circuit Court of Appeals reinstates its prior In re Hammons opinion, which deals with remedies for unconstitutionally lower quarterly fees charged to bankruptcy debtors in Alabama and North Carolina.[Fn. 1]

Opinion Points

Check out these points from the Hammons opinion:

Congress must be allowed“to fashion a modern bankruptcy system which places the basic rudiments of the bankruptcy process in the hands of an expert equitable tribunal.”

—from Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 94 (1989) (Blackmun dissent, emphasis added).

Justice Blackmun had a point—back in 1989—that remains true today:

Nostrum Oil & Gas PLC’s scheme of arrangement under Part 26 of the Companies Act 2006 (the “Scheme”) was sanctioned on 26 August 2022, with the “scheme effective date” occurring on 31 August 2022.

When parties contract for arbitration of their disputes:

Directors who oppose company windings up with little more than a hope that a restructuring proposal may bear fruit may have to weigh their actions carefully going forward, following a recent decision by the Hong Kong Companies Court.

Assignment for benefit of creditors (“ABC”) laws are, historically, a debtor remedy. ABC laws are a voluntary debtor tool for shutting down and winding up the debtor’s failed business.

Ancient History

ABC laws began under the common law, back in merrie olde England, arising out of the law of trusts. Under trust law, any person can, without restriction, transfer assets into a trust for the benefit of one or more people.

A Hong Kong court has severely criticised the provisional liquidators (PLs) appointed by the court in the company’s place of incorporation in the Cayman Islands, for trying to interfere with the rights of creditors in Hong Kong and to bypass the statutory scheme of winding-up in Hong Kong. In GTI Holdings Limited [2022] HKCFI 2598, the Honourable Madam Justice Linda Chan said it was a matter of concern to see that solicitors and counsel engaged by the PLs in Hong Kong "did not bring home to the provisional liquidators their duties owed to the creditors and to this court".

An assignment for benefit of creditor (“ABC”) is, historically, a nonjudicial process for administering the affairs of a failed business. ABC laws are rooted in English common law and predate enactment of federal bankruptcy laws in the U.S.[Fn. 1]

An ABC is made by a formal, voluntary transfer of most-or-all of a business’s assets to an assignee, in trust, to apply the property or its proceeds to the payment of debts and to return any surplus to the debtor.