After failed court-ordered mediation, Hostess Brands, Inc. – makers of iconic bakery goods that include Twinkies, Ding Dongs, Ho Hos and Wonder Bread – received permission from a bankruptcy court to cease operations and liquidate last week.

So, what does the impending liquidation of Hostess have to do with employee benefits? Well, one of the largest issues facing Hostess has been crippling union pension contributions, which have been reported as high as $1 billion.

Whether rent due should be treated as an insolvency expense (paid in preference to unsecured creditors and the insolvency practitioner's fees/expenses) remains controversially topical. With the economic recovery being more of a marathon than a sprint, and more insolvencies anticipated, both landlords and insolvency practitioners (IP) are calling for greater clarity over when rent is an insolvency expense and over what period.

Trademark licensees won a victory on July 9, 2012, when the Court of Appeals for the Seventh Circuit issued its decision in Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC. The opinion holds that the rights of a trademark licensee do not automatically terminate when its license agreement is rejected by a trademark owner in bankruptcy. Nevertheless, the significance of that victory will only become clarified if and when other courts, including possibly the Supreme Court, and Congress address the issues raised in Sunbeam.  

Whether post-death creditor protection is available to inherited IRAs under the 2005 Bankruptcy Act has been the subject of a number of cases decided in the last several years. The argument made by bankruptcy trustees is that, on the death of the IRA owner, the IRA ceases to be “retirement funds” as it is not the retirement funds of the beneficiary. Consequently, the bankruptcy trustees argue that the inherited IRA ceases to have the protection afforded to IRAs under the Bankruptcy Code.

With the number of retail administrations up 15% in the first quarter of 2012 compared to a year ago (according to research by Deloitte), the recent High Court case of Leisure (Norwich) II Limited v Luminar Lava Ignite Limited (in administration) 28 March 2012 will be of particular interest to landlords.  They will not be pleased with the decision that unpaid rent which falls due prior to the appointment of an administrator/liquidator amounts to an unsecured claim against the insolvent tenant.  It is not to be treated as an expense of the administration/liquidation (and w

The absolute priority rule of Section 1129(b) of the Bankruptcy Code is a fundamental creditor protection in a Chapter 11 bankruptcy case. In general terms, the rule provides that if a class of unsecured creditors rejects a debtor’s reorganization plan and is not paid in full, junior creditors and equity interestholders may not receive or retain any property under the plan. The rule thus implements the general state-law principle that creditors are entitled to payment before shareholders, unless creditors agree to a different result.

Code Section 409A is, in part, a response to perceived deferred compensation abuses at companies like Enron and WorldCom. The story of Code Section 409A’s six month delay provision is inextricably tied to the Enron and WorldCom bankruptcies.

Following the failure of over 400 financial institutions since the beginning of 2008, the FDIC has clarified its expectations with respect to collection and retention of bank documents by directors and officers of troubled or failing financial institutions for the purpose of explaining or defending their conduct.

USDAW v WW Realisation 1 Limited (in Liquidation)

You probably wouldn't recognise it from the case name but this case results from the closure of the much loved and sorely missed Woolworths.

Employers are obliged to carry out collective consultation with appropriate representatives when proposing to dismiss 20 or more employees from an establishment over a 90-day period: the length of the consultation period is dependent on the number of employees being dismissed. 

As this note goes to press, there is a fresh round of tenant insolvencies.  Administrators are again presenting proposals to landlords that severely reduce their rights to rent and to control who occupies their premises.

We have advised on many such proposals and secured payment of significant sums due to landlords.  Don't just accept terms proposed by administrators before taking advice.