On 4 December 2019, the UK Supreme Court issued its decision in MacDonald and another as joint liquidators of Grampian MacLennan's Distribution Services Ltd v. Carnbroe Estates Ltd [2019] UKSC 57, a Scottish case involving insolvency and "gratuitous alienations" (sales at undervalue).

The District Court for the Southern District of New York has ruled that a trustee could not amend a complaint to add federal constructive fraudulent transfer claims because those claims were preempted by the safe harbor provision of the Bankruptcy Code.^[1]  The District Court found, under a plain language reading of the safe harbor provision, 11 U.S.C.

Gurbinder Grewal and Michael Wright in the UK Construction Team explain the knock on effects of insolvencies and the mitigating steps that can be taken. Early warning signs of looming insolvency can be spotted.

Key points

Background

In May, the United States Court of Appeals for the Ninth Circuit issued a much anticipated decision in Garvin v. Cook Investments NW, SPNWY, LLC, 922 F.3d 1031 (9th Cir.

The Court of Appeal has considered whether interim dividends paid to a shareholder at a time when the company did not have sufficient distributable reserves, making the payments unlawful, could later be reclassified as salary payments.

Facts

The Court of Appeal has given guidance on when the duty of directors to have regard to the interest of creditors arises. This is an important point, as the general statutory duty of a director to promote the success of the company for the benefit of the company's members is expressly subject to the rules on creditors' interests. The court's decision also considers whether a dividend payment can be challenged as a transaction at an undervalue under section 423 of the Insolvency Act 1986.

Facts

Last month, a federal district court affirmed a bankruptcy court’s ruling that an ex-NFL player’s potential future recovery from a concussion-related class action settlement agreement was shielded from the reach of creditors in the former player’s Chapter 7 bankruptcy proceeding.  The ruling turned on the bankruptcy court’s finding that the potential future settlement payments were more akin to a disability benefit, which is exempt under Florida law, than a standard tort settlement, which is not.

Background

Delivering on the announcement in the Autumn Budget, HMRC issued its consultation "Protecting your taxes in insolvency" on 26 February 2019. The consultation proposes legislation that will give HMRC the elevated status to secondary preferential creditor in a company's insolvency. If this is implemented, HMRC will have priority to recover certain taxes from insolvent businesses ahead of other creditors from 6 April 2020.

Receivables financiers, lenders taking security assignments over contractual rights, participants in the secondary loan market and others have an interest in: