Representatives of a lender on a board will not automatically impose directors' duties on the lender, but they may apply where a director's specific instructions have led directly to a breach of fiduciary duty. The High Court recently explored this issue in an appeal in the case of Standish v Royal Bank of Scotland plc.(1)
Facts
In LNV Corporation v. Ad Hoc Group of Second Lien Creditors (In re La Paloma Generating Company, LLC, Adv. Pro. No 19-50110 (JTD) (D. Del. January 13, 2020), a Delaware bankruptcy court recently held that actions taken by a senior secured creditor to enforce its rights under an intercreditor agreement did not constitute a breach of the duty of good faith and fair dealings owed to the junior lienholders. The circumstances in La Paloma are not uncommon.
Background
In this chapter of our Annual Insurance Review 2020, we look at the main developments in 2019 and expected issues in 2020 for restructuring and insolvency.
Key developments in 2019
In one of the leading insurance insolvency and restructuring cases of 2019, Ballantyne Re, plc (Ballantyne) used an Irish scheme of arrangement to restructure its reinsurance obligations and outstanding indebtedness (the Scheme).
The laws of preferential and fraudulent transfers under the Bankruptcy Code can often seem theoretical and formulaic. When certain boxes are checked, it appears, at first blush, that a pre-bankruptcy transfer can be avoided, regardless of any intent or surrounding circumstances.
The high street is experiencing a rash of administrations, but could regulators fix the mess?
In The Sun Also Rises, Ernest Hemingway neatly summed up how bankruptcy happens. It occurs two ways: “Gradually. Then suddenly.” The British retail landscape has seen a flurry of such calamities. Thomas Cook, House of Fraser, L.K.Bennett, Debenhams, Links of London, Goals Soccer Centres, Mothercare and Jack Wills all struggled for periods before collapsing into various forms of administration.
In MicroBilt Corporation v. Ranger Specialty Income Fund, L.P. et al. (In re Princeton AlternativeIncome Fund,LP), Case No. 3:18-CV-16557 (D.N.J. Nov. 27, 2019), the District Court for the District of New Jersey recently affirmed a bankruptcy court's decision to appoint a chapter 11 trustee, without conducting a traditional evidentiary hearing. The holding reinforces that a bankruptcy court has broad discretion to grant extreme remedies in a case.
Facts
In But Ka Chon v Interactive Brokers LLC [2019] HKCA 873, the Hong Kong Court of Appeal upheld a lower court's decision to reject an application to set aside a statutory demand. The appellant had argued (among other things) that an arbitration clause in his agreement with the respondent required their dispute to be referred to arbitration.
In In re Linn Energy, LLC, 2019 WL 4149481 (5th Cir. Sept. 3, 2019), the Fifth Circuit recently reminded us that if a debt instrument looks like a security and quacks like a security, it likely is a security for purposes of subordination under section 510(b) of the Bankruptcy Code. The implications of characterizing an instrument as a security under section 510(b) is that any claim arising therefrom is subject to subordination to general unsecured creditors.