From investors to regulators, FTX Trading Ltd (FTX) filing for bankruptcy was unexpected by all. A catalyst for litigation and regulation over the years to come, this collapse will serve as a warning, particularly to cryptocurrency insurers.
What happened?
NFTs are a hot topic, but their treatment under insolvency law – which will receive more attention due to the recent crisis – has not yet been explored in much detail. This contribution aims to provide a brief overview of the most relevant issues.
NFTs as collateral
Due to their clear structure and organisation, insolvency proceedings are ideally suited for digitalisation processes. It is therefore more than surprising that despite Austria's pioneering role in the digitalisation of the justice system with its Justice 3.0 project, there has been no significant development in the expansion of digitalisation in insolvency proceedings since the early 2000s. The situation is different in Croatia, however, where the new Insolvency Act came into force in 2015 and was used as an opportunity to open the path towards digitisation.
In this chapter of our Annual Insurance Review 2023, we look at the main developments in 2022 and expected issues in 2023 for restructuring and insolvency.
Key developments in 2022
Corporate insolvencies have been rising sharply in 2022 albeit against the backdrop of record low insolvency filings during the pandemic. By June, they had reached their highest quarterly level since 2009 and the depths of the global financial crisis.
The Judgment of the Supreme Court in BTI 2014 LLC v Sequana SA was handed down on 5 October 2022.
The Supreme Court considered the circumstances in which company directors must exercise their duties under s.172 Companies Act 2006 (CA06) with regard to the interests of the creditors and affirmed the position reached by the Court of Appeal.
Comment
Some 13 years ago, Lehman Brothers' sudden and unexpected insolvency sent ripples across the banking and financial services market, some of which are still felt today.
The Court of Appeal's decision in the consolidated cases of Lehman Brothers Holdings Scottish LP 3 v Lehman Brothers Holdings plc (in administration) and others1 [2021] EWCA Civ 1523 was the latest in a long line of cases seeking to unwind the issues arising from Lehman Brothers' unexpected collapse.
The background
In Stephen John Hunt (Liquidator of Marylebone Warwick Balfour Management Ltd) v Richard Balfour-Lynn and others [2022] EWHC 784 (Ch), the High Court decided that the directors of a company which went into liquidation after participating in an ineffective tax avoidance scheme did not breach their fiduciary duties and payments made pursuant to the scheme were not transactions defrauding creditors.
Background
The Supreme Court confirmed parties' freedom to contractually modify any of the prerequisites for set-off under Bulgarian law, thus permitting various quasi-security arrangements in commercial and financial contracts that creditors may avail themselves of.
Prerequisites for statutory set-off in Bulgaria
The Hungarian government issued a decree that amends certain provisions of the bank's liquidation proceedings. The decree entered into force on 15 April 2022 and affects the solvent liquidation of Sberbank Hungary, a subsidiary of Sberbank Europe AG, the Hungarian member of the Russian Sberbank group.