In an important decision for private equity sponsors and other insiders who advance loans to their businesses, on April 30, 2013, the Ninth Circuit Court of Appeals in In re Fitness Holdings International confirmed that bankruptcy courts may recharacterize debt as equity, but held that recharacterization is determined by state law. In its ruling, the Ninth Circuit joins the U.S. Court of Appeals for the Fifth Circuit in deferring to state law on this issue and explicitly rejects the various federal law based tests that have been adopted by a majority of U.S.

The United States Bankruptcy Court for the District of Delaware recently upheld a secured lender’s claim for a $23.5 million “makewhole” premium (the “Makewhole Claim”) over the heavily litigated objection raised by the unsecured creditors’ committee in In re School Specialty, Inc., No. 13-10125 (KJC) (Apr. 22, 2013).

Chapter 11 of the U.S. Bankruptcy Code provides debtors with a number of tools to restructure comprehensively their debts and other liabilities as well as immediate protection from secured and unsecured creditors.

The Minister for Justice and Equality has brought more provisions of the Insolvency Act 2012 (the Act) into force and has designated 1 March 2013 as the establishment day of the Insolvency Service of Ireland.

Under the Personal Insolvency Act 2012 (Commencement) (No. 2) Order 2013, the following provisions of the Act came into operation on 1 March 2013:

This Act provides for the winding up of IBRC, the appointment of a Special Liquidator and other connected matters. This legislation was signed into law by the President on 7 February 2013.

The Minister for Justice and Equality has made an order which sets the 18th day of January, 2013, as the date on which Part 6 (Specialist Judges of the Circuit Court) of the Personal Insolvency Act 2012 comes into operation.

On the 12 December, the European Commission announced the proposal to update Council Regulation 1346/2000 on insolvency proceedings. They also announce a separate initiative whereby it will be highlighting the differences between national laws that have the greatest potential to hamper an efficient insolvency legal framework across the EU.

This Q&A focuses on the need to modernise the EU Insolvency Regulation to facilitate the restructuring of businesses in financial difficulty.

Questions include: why do the current rules need updating, what is the impact of the insolvency rules on the economy, how many businesses are affected and what are the next steps?

On 26 December last, the Personal Insolvency Act 2012 was signed into law by the President.

The various provisions of the Act will come into force through commencement orders which will be made by the Minister for Justice. It is expected that certain sections of the Act relating to its Establishment Day and related provisions, will be commenced shortly.

The remaining provisions will then come into operation on a phased basis under Section 1(2) of the Act, as designated by orders to be made by the Minister.

The Personal Insolvency Bill has now passed through the Dail and will commence in the Seanad. The Minister for Justice has commented that the intention is still to have the Bill enacted by Christmas.