Since our last newsletter, Russia's war in Ukraine rumbles on, domestic inflation hits new highs and there are signs of an increase in activity in the insolvency market. Russians unlawful assault on Ukraine continues unabated, as we enter the European summer months, and the fourth month of the invasion. Besides the utter devastation inflicted on the people and infrastructure of Ukraine, the war is having a significant impact on both global food and oil prices.

We open the year with several events of major significance. The unlawful invasion of Ukraine by Russia is justifiably dominating the news cycle, with harrowing images of the impact of Russia's indiscriminate military bombardment on Ukrainian cities and towns. The invasion will have a substantial impact on the global economy. The conflict is also highly likely to have implications for our own domestic markets despite the geographical distance between us. Local sharemarkets have been volatile and oil prices have spiked in the last week.

The New Zealand economy has weathered the COVID-19 pandemic better than many commentators predicted in April last year, in part due to the significant economic stimulus from the government, coupled with record high house prices and rock bottom interest rates. This is reflected in RITANZ's latest formal insolvency statistics, which show record low liquidation application numbers for September 2021 compared to the three previous years.

As witnessed repeatedly from countless national news sources, bankruptcy bulletins and scholarly articles, bankruptcies within the retail and restaurant industries have been booming. Within Fredrikson & Byron’s national practice alone, landlord and lessor clients found themselves wrapped up in many of these national bankruptcy cases, including those for CEC Entertainment, Inc. (better known as Chuck E. Cheese), Pier 1 Imports, Inc., and Vitamin OldCo Holdings, Inc., (f/k/a GNC Holdings, Inc.), amongst many others.

Numerous changes have been made to the Paycheck Protection Program (PPP) in recent months, primarily stemming from the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act) signed into law in December 2020 as part of the overall Consolidated Appropriations Act, 2021, and related administrative rules and guidance issued by the Small Business Administration (SBA). In this article, we address frequently asked questions and guidance regarding the initial PPP loans taken out by Borrowers (First Draw Loans).

According to the U.S. Bureau of Labor Statistics, approximately 20 percent of new businesses fail during the first two years of being open, 45 percent during the first five years and 65 percent during the first 10 years. The unprecedented financial challenges of COVID-19 have increased the number of business failures and economists project that the number of failures will accelerate in the quarters ahead.

Prior to the COVID-19 pandemic, the Bankruptcy Code generally has been interpreted to require debtors to pay rent obligations on time under unassumed real property leases as those obligations arose post-filing and pre-rejection. This result was driven by 11 U.S.C. § 365(d)(3), which requires the debtor to “timely perform” all obligations until the lease is assumed or rejected, with one narrow exception. That exception permits the court to allow the debtor to extend the time of performance of any obligation within the first 60 days of the case but not beyond the 60-day period.

The real lesson from Debut Homes – don't stiff the tax (wo)man

The Supreme Court has overturned the 2019 Court of Appeal decision Cooper v Debut Homes Limited (in liquidation) [2019] NZCA 39 and restored the orders made by the earlier High Court decision, reminding directors that the broad duties under the Companies Act require consideration of the interests of all creditors, and not just a select group. This is the first time New Zealand’s highest court has considered sections 131, 135 and 136 of the Companies Act, making this a significant decision.

The English High Court in Telnic Ltd v Knipp Medien Und Kommunikation GmbH [2020] EWHC 2075 (Ch) has confirmed that the court has discretion to restrain a winding-up petition against debtor's when the debt is governed by an arbitration agreement.

Knipp Medien Und Kommunikation GmbH (Knipp) appealed against an order to stay its winding-up petition against Telnic Limited (Telnic). Telnic also brought a cross-appeal seeking orders that Knipp's petition be dismissed rather than stayed.

Insurance covering the representations and warranties of a seller in a purchase agreement (RWI) has become relatively commonplace in non-distressed M&A transactions. Insurance covering other specific contingent risks associated with a transaction, such as environment liability or tax liability or benefits, is also available. Less commonly, but with increasing frequency, these transaction insurance policies are being marketed and sold in transactions arising in bankruptcy and insolvency transactions.