Introduction
This article was published in a slightly different form in the November 2016 issue of Futures & Derivatives Law by The Journal on the Law of Investment & Risk Management Products.
Introduction
It is fair to say that not many, if any, banks have internal controls or policies and procedures to identify and mitigate deficiencies in the bankruptcy practices of banks. Indeed, banks typically rely on their Legal Department or external counsel to make sure banks protect their interests when bank customers file bankruptcy. While the Compliance Department and the Risk Management Department track compliance and risks related to numerous laws, rules and regulations, the Bankruptcy Code and its rules are typically not among those laws and rules.
In Czyzewski v. Jevic Holding, 580 U.S. __(2017), decided on March 22, the U.S. Supreme Court held that, without the consent of impaired creditors, a bankruptcy court cannot approve a "structured dismissal" that provides for distributions deviating from the ordinary priority scheme of the Bankruptcy Code. The ruling reverses the decisions of the U.S. Bankruptcy Court for the District of Delaware, the U.S. District Court for the District of Delaware, and the U.S.
After months of public consultations and revision, the Singapore parliament passed the Companies (Amendment) Bill (the "Bill") on 10 March 2017 amending the Singapore Companies Act (the "Companies Act"). The Bill contains, among others, significant and novel changes to Singapore's insolvency laws. This is no doubt a giant step towards positioning Singapore as Asia Pacific's Debt Restructuring Hub with cross-border restructuring capabilities.
Introduction - The Bill
The immediate effect of Jevic will be that practitioners may no longer structure dismissals in any manner that deviates from the priority scheme of the Bankruptcy Code without the consent of impaired creditors.
In its recent decision in Pars Ram Brothers (Pte) Ltd (in creditors’ voluntary liquidation) v Australian & New Zealand Banking Group Ltd and others [2017] SGHC 38, the Singapore High Court held that the security interests of lenders survived the commingling of assets, and that the assets should be divided among the secured lenders in proportion to their respective contributions.
Facts
Securing support from principal creditors makes all the difference between a chapter 11 restructuring that saves a troubled shipping company and one that sinks it.
When a shipping company's financial distress is extreme, it must work fast to preserve value and stem losses. The use of chapter 11 by shipping companies to coerce principal creditors to support an unfavorable restructuring where ownership refuses to share risk is costly, value destructive and generally fruitless.
In Russian insolvency procedures, it is quite common for third parties to try to exclude property from a debtor’s insolvent estate (konkursnaya massa) by claiming title to its real property in the absence of the registered title. These third parties may refer to the agreements that had been made prior to the commencement of the insolvency procedure as well as to the actual transfer of property to them.
A recent judgment of the German Federal Fiscal Court (FFC) will have significant impact on the restructuring tool kit afforded under German law. The FFC has found that the existing practice of permitting a tax liability arising from restructuring gains to be deferred and (eventually) waived violates fundamental principles of German law. The ruling has created uncertainty regarding the proper tax treatment of restructuring gains, which may have the effect of diminishing the prospect of success of a restructuring for a company in financial distress.