In normal circumstances, a director’s primary duty (owed to the company, not the company’s shareholders or the corporate group) is to promote the success of the company for the benefit of its shareholders as a whole. When a company enters a period of financial distress (the so-called “zone of insolvency”) there is a shift of emphasis in the duties of the directors: directors must consider the interests of the company’s creditors and, depending on the extent of the financial distress, may need to prioritise such interests over those of its members.

When a company enters a period of financial distress, directors must consider the interests of the company’s creditors and, depending on the extent of the financial distress, may need to prioritise such interests over those of its members. In such distressed situations, the key current heads of liability directors may face (for which they may potentially incur personal liabilities) include wrongful trading, fraudulent trading, misfeasance and breach of duty.

On April 23, 2019, Ropes & Gray, representing a large group of shareholder defendants, won a decision in the U.S. District Court for the Southern District of New York that provides potential fraudulent transfer protection for payments made to shareholders in leveraged buyouts, stock redemptions and other securities transactions.

Constructive Fraudulent Transfer Claims and the Securities Safe Harbor

Cash flow is the life blood of the construction industry, goes the mantra. Construction projects often have long supply chains. When cash stops flowing down the chain, businesses can fail. There is all too much recent evidence of this.

Someone in the chain (say, a main contractor) could seek to provide in a contract that it does not have to pay the party below (subcontractor) until it has been paid by the party above (employer). This is a 'pay-when-paid' clause.

If a transaction by a company amounts to an "unlawful distribution", and the company subsequently goes into liquidation, will an action for recovery of the benefits of that distribution, brought against the directors who authorised the transaction, be statute-barred if it is commenced by the liquidator of the company more than 6 years after the distribution was made?

On February 27, 2018, the U.S. Supreme Court issued a ruling that will make it easier for bankruptcy trustees, creditors’ committees, and other bankruptcy estate representatives to claw back payments made to shareholders in leveraged buyouts and dividend recapitalizations.

Constructive Fraudulent Transfer Claims and the Securities Safe Harbor

DOMESTIC

Research on the impact of repossession risk on mortgage default

Terry O’Malley published an economic letter considering whether reducing the risk of repossession resulted in more Irish borrowers defaulting on their mortgages. The letter considers the impact of the ''Dunne judgment'' in 2011 which temporarily removed a bank's ability to lawfully repossess a home. One of the key findings was that borrowers defaulted on mortgages at a higher rate than if the repossession regime at the time was legally upheld.

Introduction

There are two principal mechanisms for the dissolution of a solvent Irish company:

• Voluntary Strike-Off (VSO); and
• Members' Voluntary Liquidation (MVL).

To the extent there are other Irish or EU entities in the group, it may also be possible to dissolve the company by way of merger with another group entity.

In Reilly & Personal Insolvency Acts 2012-2015 [2017] IEHC 558, Baker J, 5 October, 2017, the High Court held that applications to Court under Section 115A of the Personal Insolvency Acts 2012-2015 (the Acts), for approval of a Personal Insolvency Arrangement (PIA) despite its rejection by creditors, must be made by a Personal Insolvency Practitioner (PIP) and not by the Debtor themselves.

On June 27, 2017, the U.S. Supreme Court agreed to hear an appeal brought by Ropes & Gray of the Fourth Circuit’s decision in PEM Entities LLC v. Eric M. Levin & Howard Shareff. The Supreme Court’s decision in the case will have significant implications for business owners making debt investments, including rescue loans, and purchasing the distressed third-party debt of their companies.