Weil's Appellate & Strategic Counseling group welcomes you to Weil's SCOTUS Term Review. Here, we summarize and analyze the cases from the 2023 Supreme Court Term that are most germane to our clients' businesses.
The BC Court of Appeal has confirmed the jurisdiction for Canadian courts to make reverse vesting orders (“RVO”) in receivership proceedings. British Columbia v.
BP Canada Energy Group ULC (“BP”) has applied for leave to appeal a decision under section 13 of the Companies’ Creditors Arrangement Act (the “CCAA”) and for a stay of the orders rendered by Justice Yamauchi on April 24, 2024
In Harrington v. Purdue Pharma LP, in a 5-4 decision, the Supreme Court held that the Bankruptcy Code does not authorize bankruptcy courts to confirm a Chapter 11 bankruptcy plan that discharges creditors’ claims against third parties without the consent of the affected claimants. The decision rejects the bankruptcy plan of Purdue Pharma, which had released members of the Sackler family from liability for their role in the opioid crisis. Justice Gorsuch wrote the majority decision. Justice Kavanaugh dissented, joined by Chief Justice Roberts and Justices Kagan and Sotomayor.
Today, in Office of the United States Trustee v. John Q Hammons Fall 2006, LLC, the Supreme Court held that debtors who paid fees in bankruptcy cases administered by the U.S. Trustee Program are not entitled to any relief, even though the Court previously ruled that those debtors had been unconstitutionally overcharged. This decision is the culmination of several years of litigation concerning differential fee structures across judicial districts.
This morning, the Supreme Court decided Truck Insurance Exchange v. Kaiser Gypsum Co., which clarifies that any party with a "direct financial stake in the outcome" of a reorganization has standing as a "party in interest" to object to a Chapter 11 plan. 11 U.S.C. 1109(b). Writing for a unanimous Court, Justice Sotomayor held that the debtor's insurer has standing to object even if the plan purports to preserve the insurer's legal rights and thus is said to be "insurance neutral."
Creditors want to recover as much money as they can from their debtors as quickly and painlessly as possible. When those debtors take steps to delay, defeat and hinder a creditor’s recovery, creditors can rely on the Fraudulent Preference Act, RSBC 1996, c. 164 (“FPA”) and the Fraudulent Conveyance Act, RSBC 1996, c. 163 (“FCA”) to set aside transactions that have that intention and effect. Generally, the FCA allows “creditors and others” to void dispositions of property designed to delay, hinder or defraud their claims.
Borrower beware: in times of distress, your credit documents may give your secured lenders an opportunity to “flip” control of your board
Distress happens, even at companies that once appeared financially solid. When it does, the company, its board (which may be controlled by a sponsor in a public or private equity scenario), and its lenders often enter into restructuring discussions in search of a consensual path forward, typically under the terms of a forbearance agreement.
Overview
In the recent decision of Invico Diversified Income Limited Partnership v NewGrange Energy Inc, 2024 ABKB 214 (“NewGrange”), the Alberta Court of King’s Bench clarified when gross overriding royalties (“GOR”) can be vested out of a debtor company’s estate pursuant to a reverse vesting order (“RVO”). The Court allowed GORs to be vested off under the Applicant’s, Invico Diversified Income Limited Partnership (“Invico”), proposed RVO, finding the GORs to be mere contractual rights and not proper interests in land.
When a company is on the brink of entering into insolvency proceedings the tax impact, understandably, may not be at the forefront of everyone’s mind and so may be overlooked. However, entry into liquidation or administration or the appointment of a receiver can have an adverse impact on, and sever, UK tax groups. This can result in (unexpected) tax leakage and further depletion of assets, adding greater pressure to the distressed situation.