Factoring is a common way for businesses to monetize current assets. Typically, in a factoring transaction, an enterprise sells its accounts receivable to a third party (commonly a bank, but not always), which, in exchange for a discount on the value of the receivables, takes on the effort and time commitment related to collecting the accounts.
The recent decision by the Court of Appeal for Ontario (the “Court”) in 306440 Ontario Ltd. v. 782127 Ontario Ltd.1 serves as a cautionary reminder to secured creditors that their position may not always be at the top of the insolvency food chain, even when they have taken all the proper steps to perfect their security interests.
Introduction
In this Banking Reform updater we examine the single resolution mechanism (SRM), which together with the single supervisory mechanism (SSM) (Banking Reform updater 10) forms the key pillars of the EU Banking Union.
What is the SRM?
Declining to follow a 2012 decision, the High Court has ruled that a bankrupt’s unexercised rights to draw his pension did not represent income to which he was entitled within the meaning of the Insolvency Act 1986, and so did not form part of the bankruptcy estate.
Background
The process of repossession will involve complex issues of fact and law. Each one is different depending upon the jurisdiction involved, the approach of the operator and the attitude of the relevant authorities.
Information and planning
1. What is the risk if a counter-party is located in an exiting member state?
What might be the funding risk?
A member state exit is likely to result in increased liquidity problems and less available funding as financial institutions manage their exposure to the Eurozone. Businesses may find that traditional sources of finance (loans, bonds etc) are less easy to obtain or raise.
Intra group funding may also be problematic if there are intra-company loans to subsidiaries located in risk member states and those subsidiaries are having difficulty meeting their payment obligations under such loans.
On December 1, 2014, the Court of Appeal for Ontario (the “Court of Appeal”) released its decision, written for the Court of Appeal by Madam Justice Pepall, in Bank of Nova Scotia v. Diemer, 2014 ONCA 851 (“Diemer”). The Court of Appeal dismissed the court-appointed receiver’s (the “Receiver”) appeal of the order of Justice Goodman, which, among other things, reduced the fees of counsel (“Counsel”) to the Receiver.
Bankruptcy and insolvency professionals should take note of two recent Ontario Superior Court decisions that put professional fees in the spotlight. TNG Acquisition Inc. (Re), 2014 ONSC 2754 [Commercial List] (“TNG Acquisition”) and Bank of Nova Scotia v. Diemer, 2014 ONSC 365 (“Diemer”), saw Brown J. and Goodman J., respectively, reduce fees for court-appointed officers and their legal counsel on the basis that the amounts sought were unreasonable in consideration of the work performed.
Again, of interest to all schemes providing defined benefits is the recent settlement in the litigation involving the Lehman Brothers Scheme, where the payment of £184 million, representing costs of the buying-out benefits, has been agreed.
Following a detailed investigation by TPR commencing in 2008, and a legal battle through the hierarchy of courts up to the Supreme Court (SC), members of the Lehman Brothers Pension Scheme will receive their full benefits after a settlement was reached on 18 August 2014.