As discussed in our post last month, it was a long road for Arrowood Indemnity to be placed into liquidation in Delaware.

Key takeaways

The Kemper/Lumbermens saga

To refresh everyone’s recollection, this is a report from Business Insurance from March 14, 2010:

A "Liquidation Preference" is a clause in investment and shareholders’ agreements that determines the order in which proceeds from a liquidity event (such as a trade sale or asset sale) are distributed among different shareholders. This clause often pertains primarily to preferred shareholders, such as venture capital investors.

The Federal Labour Court (Bundesarbeitsgericht, BAG) had to decide in which case a social compensation plan endowment by the conciliation committee is economically unjustifiable for a company outside of insolvency. This shall be the case if the fulfilment of the social compensation plan obligation would lead to illiquidity, balance sheet over-indebtedness or an unacceptable reduction of the company's equity. If the endowment was economically unjustifiable, the discretion of the conciliation committee was exceeded and the social compensation plan therefore invalid.

Das Bundesarbeitsgericht (BAG) hatte darüber zu entscheiden, wann eine Sozialplandotierung durch die Einigungsstelle für ein Unternehmen außerhalb der Insolvenz wirtschaftlich unvertretbar ist. Dies sei der Fall, wenn die Erfüllung der Sozialplanverbindlichkeit zu einer Illiquidität, einer bilanziellen Überschuldung oder einer nicht mehr hinnehmbaren Schmälerung des Eigenkapitals der Gesellschaft führe. Liege danach eine wirtschaftliche Unvertretbarkeit vor, sei das Ermessen der Einigungsstelle überschritten und der beschlossene Sozialplan unwirksam.

Summary of Purdue Pharma, L.P. v, City of Grand Prairie (In re Purdue Pharma, L.P.), No. 22–110 – Bk (2d Cir. May 30, 2023)

If at first you don’t succeed, try (and maybe try) again.

Basic Facts: Nomenclature and Numbers

When a previously reorganized debtor files a second chapter 11 case, courts and commentators refer to that continued entity’s second reorganization as a “chapter 22.” When a third case follows a second, “chapter 33” is a favored colloquialism; when a fourth, “chapter 44” is the name of choice. In practice, however, industry figures often denominate any repeat bankruptcy as a “chapter 22.”

In two cases in as many months, the Supreme Court tackled the application of sovereign immunity in two separate insolvency statutes. Two separate government-like entities suffered conflicting fates while the Court (arguably) employed the same analysis. How so?

Clear Statement Rule

In the latest decision of the Hong Kong court to consider the interplay between arbitration clauses and winding-up or bankruptcy petitions, on 22 May 2023, the Hon. Linda Chan J (the Judge) made a winding-up order against Simplicity & Vogue Retailing (HK) Co. Limited (the Company) and rejected the Company’s argument that the dispute over the underlying debt should be referred to arbitration.