This is the second in a series of articles on how the changes introduced by the 2024 JCT (Joint Contracts Tribunal) contracts will impact the practical administration of the JCT contractual mechanisms.

In this article, we look specifically at the insolvency related provisions in the 2024 Design and Build (D&B) contract and the 2024 Intermediate Building Contract with Contractor’s design (ICD) contract. We address the updates to the definition of insolvency, the impact of those changes for Employers and Contractors and the related knock-on impact to sub-contracts.

Building on emerging trends, 2024 has seen a continued rise in the use of equity-linked debtor-in-possession (DIP) financing in Chapter 11 cases.

Recent examples from WeWork and Enviva illustrate how stakeholders are leveraging this innovative tool to drive broader reorganization strategies and outcomes rather than as a mechanism solely providing interim financing to fund a debtor’s operations during the pendency of its bankruptcy case.

WeWork

In a recent judgment¹, the High Court determined (contrary to the arguments of the affected secured creditor) that a debenture created a floating charge rather than a fixed charge over certain internet protocol (IP) addresses. Whilst elements of the decision are inevitably fact-specific, some broader lessons and reminders can be taken from the judgment which will be of general relevance to lenders when taking security.

Building on emerging trends, 2024 has seen a continued rise in the use of equity-linked debtor-in-possession (DIP) financing in Chapter 11 cases.

Recent examples from WeWork and Enviva illustrate how stakeholders are leveraging this innovative tool to drive broader reorganization strategies and outcomes rather than as a mechanism solely providing interim financing to fund a debtor’s operations during the pendency of its bankruptcy case.

WeWork

On May 31, 2024, the chief judge of the U.S. Bankruptcy Court for the Southern District of New York (SDNY) entered General Order M-634, adopting guidelines for combining the processes for Chapter 11 plan confirmation under Section 1129 of the Bankruptcy Code and disclosure statement approval under Section 1125 of the Bankruptcy Code.

On January 22, 2024, the chief judge of the U.S. Bankruptcy Court for the Southern District of New York entered General Order M-621 adopting amended procedural guidelines governing prepackaged Chapter 11 cases.

The guidelines provide a comprehensive framework for the administration of prepackaged Chapter 11 cases in the district. Among other things, they recognize and address “Rapid Prepackaged Chapter 11 Case[s],” defined as cases “where the Debtor seeks confirmation of the plan to be granted between one (1) and fourteen (14) days after the petition date.”

Key Points

Introduction

Independent schools have not been immune from financial stress in recent years. Prior to the pandemic a combination of increasing staff costs, greater competition and the need for continual investment in technology and premises was already posing challenges for a number of institutions. This was exacerbated by the unique pressures of COVID, which saw income squeezed as a result of enforced school closures and reduced pupil numbers.

In a judgment that will be welcomed by insolvency professionals, the Supreme Court has today confirmed that administrators cannot be personally criminally liable for failing to notify the Secretary of State about plans for collective redundancies. This judgment follows an appeal by Robert Palmer against a finding that he was criminally liable for his failure to submit form HR1 in his capacity as the joint administrator of West Coast Capital (USC) Limited (USC).

What is the obligation?

This judgment reinforces the Court’s power to order a judgment debtor to draw down their pension for the benefit of the creditors as recently seen in Bacci v Green.

Summary

The recent judgment handed down by the High Court in Manolete v White [2023] EWHC 567 (Ch) reinforces the Court’s power to order a judgment debtor to exercise a right to draw down on their pension for the benefit of creditors as recently seen in Bacci v Green.

The Facts