Corporate restructuring transactions are often motivated by tax planning, though there are usually other legitimate corporate needs to be achieved. The Corporations Tax Code of Japan contains provisions granting the government power to deny the effects of corporate restructuring for tax purposes—e.g., Article 132 (for family company group transactions) and Article 132-2 (for intra-group mergers and other reorganizations). In recent years, Japanese courts have been trying to clarify the standard for denying the tax effect of certain restructuring transactions.

The consequent distress in the market is evident with 9 supplier insolvencies in the last few weeks alone, including Avro Energy, Utility Point and People’s Energy.

Today, 1 October 2021, is important as Ofgem is due to increase tariff caps from that date. This is also the date when the restrictions on petitioning for the winding up of companies on the basis of insolvency will be eased.

Legal landscape – energy regulations

In distressed situations, there are a number of issues to navigate, including:

PH Insight for News and Analysis of the Latest Developments from the Courts of England and Wales for August 2021

In this edition. . .

There have been two recent changes to the insolvency laws in England and Wales relating to winding up petitions1 and Part 1A moratoriums.

Winding up petitions – Relaxation of restrictions

In SolarReserve CSP Holdings, LLC v. Tonopah Solar Energy, LLC, C.A. No. 78, 2021 (Del. Aug. 9, 2021), the Delaware Supreme Court recently dismissed a books-and-records appeal as moot and vacated a judgment issued by the Court of Chancery after appellee Tonopah Solar Energy, LLC (Tonopah) emerged from a Chapter 11 bankruptcy proceeding as a new limited liability company operating under a new limited liability company agreement.

Prior to the end of the transition period (31 December 2020), U.K. restructuring tools enjoyed universal and automatic recognition throughout the European Union. However, the legal landscape is now tainted with uncertainty and the legal position regarding recognition is more complex. Recognition is important to ensure that a scheme of arrangement, a restructuring plan, or a company voluntary arrangement (“CVA”) is fully binding on parties and to minimise the risk of challenge.

Following the landmark decision by Justice Trower in Re DeepOcean 1 UK Ltd,¹ Justice Snowden delivered another important judgment on the use of cross-class cram downs as he sanctioned the Virgin Active² restructuring plans.

In addition to the extension to the commercial eviction ban until 30 June 2021, the UK Government has now also extended the moratorium on commencing winding-up proceedings until 30 June 2021.

You may view the regulation from the UK Government at gov.uk.

On 16 March 2021, the German Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, or BaFin) declared Greensill Bank AG (Greensill) to be an indemnification case, meaning that German deposit insurance institutions can compensate the bank’s creditors.

BaFin had previously filed an insolvency petition against Greensill, and the insolvency court in Bremen opened insolvency proceedings on 16 March 2021. It appointed an insolvency administrator who is now responsible for managing Greensill’s affairs.

The case in question is CIMB Bank Bhd v. World Fuel Services (Singapore) Pte Ltd [2021] SGCA 19. The decision was delivered on 5 March 2021 by the Singapore Court of Appeal.

The judgment addresses issues surrounding claims by a bank under assignments and other security documents over rights in and receivables under commodities supply contracts, and overturns the Singapore High Court decision in CIMB Bank Bhd v. World Fuel Services (Singapore) Pte Ltd [2020] SGHC 117.

Summary