The Supreme Court’s decision in a dispute over a parent company guarantee will change the way insolvency practitioners deal with the distribution of assets when a corporate group collapses.
On 25 January 2022, the Financial Conduct Authority (FCA) published draft guidance on how it will approach ‘compromises’ by regulated firms. The guidance is expressed to cover restructuring plans, schemes of arrangement and CVAs.
The Court of Appeal decision in the Nortel case upheld the High Court ruling that FSD/CN liability is an expense of the administration and therefore ranks ahead of administrators' remuneration, floating charges and unsecured creditors. Much of the press coverage which has followed in the immediate aftermath seems to have assumed that the decision is a victory for "good" pensioners over the "bad" banks.
A number of key decisions from the English courts in 2021 illustrate the litigation trends that are likely to have implications for the financial services industry in 2022 and beyond (see below “Cases to watch in 2022”).
Market misconduct and mis-selling
In the first of a series of claims issued by ECU Group Plc in relation to alleged wrongdoing in the foreign exchange markets by a number of banks, the High Court held that:
The German parliament (Deutscher Bundestag) has recently passed a law on the restructuring and dissolution of distressed financial institutions, establishing a sector-wide restructuring fund and extending the statute of limitations for the liability board members (Restructuring Act).
Summary
In its communication on an EU framework for crisis management in the financial sector dated 20 October 2010, the European Commission set out several major legislative proposals aimed at preventing a repeat of the recent bank failures that necessitated significant state aid.
The demand by asset managers, CLOs and other investors for leveraged loans continues to fuel the market for cov-lite loans that include other terms that are attractive for sponsors. These terms often allow for liability management transactions by permitting transfers of assets to unrestricted subsidiaries, or the non-pro rata uptiering of debt and incurrence of super-priority debt with mere majority lender consent.
The recent descision of BNY v Eurosail1 is an important modern descision on the blance sheet test for insolvency.
For most businesses, the Chancellor’s budget statement yesterday brings some welcome news with the extension of certain critical Covid-19 support measures. However, this is coupled with the removal of certain government-backed loan schemes and a future increase in the corporation tax rate from 19 per cent to 25 per cent from 2023 onwards.