On October 10, 2019, the United States Bankruptcy Court for the Southern District of Ohio (OHSB) entered General Order 30-2 implementing Complex Chapter 11 procedures. Under General Order 30-2, a case is eligible to be a complex case if (1) it is filed under Chapter 11 of the Code; (2) it is not filed by an individual debtor, as a single asset real estate case, or as a small business case as defined in § 101(51C) of the Code; and (3) the debt of the debtor or the aggregate debt of all affiliated debtors is at least $10 million or it involves a debtor with publicly traded debt or equity.

The Austrian Supreme Court has recently found that insolvency related avoidance claims can be sold. This may open a whole new business segment and will most certainly have a material impact on defendants in avoidance proceedings.

Assignability of insolvency related avoidance claims

A financial crisis and situations where insolvency is imminent are not only challenging for a company and its management, but also entail significant liability risks for management in the case of subsequent insolvency proceedings. Payments made after a company has become materially insolvent (i.e. illiquid or overindebted under Austrian insolvency law), but before the 60-day deadline for filing for insolvency has expired, are risky. Which payments are allowed according to the Austrian Supreme Court?

Scope of liability

The list of successful restructurings outside insolvency proceedings is as long as it is confidential. Every year, companies of all sizes are stabilised and sustainably restructured without the stigma of insolvency proceedings. However, until now there has been no European legal framework for pre-insolvency restructurings and only a few national laws explicitly provide for the possibility of such preventive restructurings. This will change now.

The Sixth Circuit recently held that Baker Botts, L.L.P. v. ASARCO, L.L.C., 135 S. Ct. 2158 (2015) does not apply to contempt sanctions. Baker Botts stands for the proposition that the general American Rule (i.e., each party is responsible for paying its own attorneys’ fees) applies in the normal course of bankruptcy proceedings, preventing courts from awarding attorneys’ fees incurred for defending fee applications filed pursuant to section 330 of the Bankruptcy Code.

The Austrian Insolvency Code provides for the possibility to challenge certain disadvantageous transactions carried out by the debtor after material insolvency has occurred, especially if the creditor knew or should have known of its debtor's material insolvency. This risk of legal actions being contested is of particularly high relevance for shareholders who are also creditors of the debtor company, as the Austrian Supreme Court recently decided that shareholders' information rights would result in an increased level of due diligence.

Leveraged transactions, such as leveraged buyouts (LBO) and leveraged recapitalizations, carry the risk of being unwound in a later bankruptcy of the party that transferred assets (including granting liens) or incurred obligations in the transaction. The risk that such transactions may be upset in bankruptcy extends, of course, to selling shareholders in an LBO and to shareholders who receive purchase price funds or dividends in a leveraged recap.

On May 25, 2018, the United States Court of Appeals for the Second Circuit upheld a district court’s decision that Sabine Oil & Gas Corporation could reject certain gathering service agreements in bankruptcy. The agreements, with Nordheim Eagle Ford Gathering, LLC, provided that Nordheim would supply Sabine with certain gathering, transportation and treatment services for Sabine’s natural gas and condensate production.

Following the opening of insolvency proceedings, the insolvency receiver typically tries to enlarge the insolvency estate by asserting voidance claims. Legal acts that occurred within certain suspect periods prior to the opening of insolvency proceedings might be declared void. Creditors may mitigate certain avoidance risks by investigating the debtor's financial situation when conducting legal transactions.

Responsibility to investigate

schönherr journal www.schoenherr.eu 02/2017 S  cílem harmonizovat a  posílit ochranu proti odcizení obchodního tajemství na úrovni EU byla minulý rok přijata Směrnice Evropského parlamentu a  Rady (EU) 2016/943 ze dne 8. června 2016 o  ochraně nezveřejněného know-how a  obchodních informací (obchodního tajemství) před jejich neoprávněným získáním, využitím a zpřístupněním (dále jen „Směrnice“). V návaznosti na zavádění Směrnice do českého právního řádu dozná určitých změn dosud platná právní ochrana obchodního tajemství.