The Court of Appeal has decided that rent accruing during a period of administration should be treated as an expense of the administration, irrespective of the date on which it falls due for payment. Administration expenses are paid by administrators in priority to liabilities owed to holders of security.

The OCC has issued guidance to clarify supervisory expectations for national banks and federal savings associations in situations where secured consumer debt is discharged under Chapter 7 bankruptcy proceedings. The guidance issued on February 14 in OCC Bulletin 2014-4 describes the analysis necessary to “clearly demonstrate and document that repayment is likely to occur” to avoid the charge-off that would otherwise be required by the OCC’s Uniform Retail Credit Classification and Account Management Policy.

Key points

A recent decision of the Alberta Court of Queen’s Bench in Tallgrass¹⁰ clarifies the threshold that a company must meet when it seeks relief pursuant to the CCAA¹¹, particularly when such an application is met with a competing applicati

If Peter Morton and Cinitel Corp. had their way, every lender would have a distinct duty to a guarantor to permit the sale of a defaulting borrower’s assets as a going concern. In their view, a lender should be required to maximize its recovery from the borrower and to minimize any claim made on a guarantee. Fulfilling that duty would also obligate a lender to keep funding a borrower while that asset sale was negotiated and completed. It is enough to make any lender cringe.

Fortunately, the Ontario Court of Appeal disagreed with Morton and Cinitel’s view of the lending world.

The recent decision in BNY Corporate Trustee Services Limited v Eurosail - UK 2007 - 3BL PLC (Eurosail) has provided helpful guidance on the interpretation of the insolvency tests set out in section 123 of the Insolvency Act 1986. This guidance is not only relevant to companies with financial problems. The common practice of drafting contractual events of default by reference to section 123 means that it has significance to anyone who is creating or is party to contracts (whether finance documents or other commercial contracts) containing this type of provision.

Comfort letters can be a useful tool for providing an assurance of support from a parent to a subsidiary company. In some cases they help inform the decision of the board of a subsidiary and its continuing trade. It's possible for such letters to form binding obligations in law, if carefully considered and drafted.

In an earlier edition of Fully Secured (June 27, 2012 – Volume 3, Number 2), we reported on the Ontario Court of Justice decision in Snoek ⁷ where security granted by a borrower (“HSLP”) to a group of individual creditors (“B”) was held to constitute an improper preference and declared invalid following a challenge by the trustee in bankruptcy. B had been one victim of a Ponzi scheme involving numerous unsecured creditors of HSLP.

Sale at an undervalue; time for presenting a petition; implied term avoids manifest injustice; complying with time limits; order for sale threshold; Wragge & Co's finance litigation experts bring you the latest on the cases and issues affecting the lending industry.

Sale at an undervalue

In Butterfield Bank (UK) Ltd v Philip and others, the bank sought summary judgment against four guarantors of a bank facility. It was alleged that the bank had sold a property at a £500,000 undervalue.

Shareholders often overlook the need to properly document loan advances in their haste to provide funds to the company, without being aware of the significant consequences that can result.