Bankruptcy

On March 5, 2012, new rules came into force for credit cooperatives in bankruptcy proceedings; the new rules feature:

The Financial Crisis, a difficult market situation and a tense liquidity status have led to remarkable difficulties for mid-sized businesses within the past years. Strategic and financial investors have and continue to utilize these circumstances to acquire interesting distressed companies for comparatively moderate purchase prices.

In order to benefit from these circumstances, investors need to understand how to avoid or minimize the risks of liability related to such acquisitions.

Manley Toys Limited once claimed to be the seventh largest toy company in the world. Due to ongoing litigation and declining sales, it entered into a voluntary liquidation in Hong Kong. On March 22, 2016, the debtor’s appointed liquidators and foreign representatives filed a motion for recognition under chapter 15 of the Bankruptcy Code. The motion was opposed by ASI Inc., f/k/a Aviva Sports, Inc. (“Aviva”) and Toys “R” Us, Inc. (“TRU”).

With the significant strain placed on market participants as a result of the combined impacts of the global COVID-19 pandemic, the oil price war and the ensuing liquidity and credit crunches, we expect that a number of enterprises in the United Arab Emirates ("UAE") will either be forced to carry out restructurings or otherwise undergo formal court-supervised insolvency processes.

It’s been quite a week for important cases on TUPE and its operation in relation to administrations. The Court of Appeal has delivered two judgments which are of considerable importance for those contemplating and structuring transactions out of administration.

The key points to note are that:

The respected Financial Markets Law Committee sponsored by the Bank of England has published a paper, dated October 2011, containing an analysis of legal uncertainty in the FSA’s Client Assets Sourcebook (CASS) and arising from judicial decisions relating to the administration of Lehman Brothers International (Europe).

On 31 October 2011, MF Global UK Limited, an insolvent investment broker, became the first investment firm to enter the special administration regime (the “SAR”) created by the Investment Bank Special Administration Regulations 2011 (SI 2011/245).

The SAR was adopted in February 2011 following the collapse of Lehman Brothers and has the advantage over ordinary corporate administration in that it sets special objectives for the administrator and this is the first time the SAR has been used. The SAR sets three objectives for a special administrator:

In this DechertOnPoint, we summarise HM Treasury’s work to establish effective resolution arrangements for investment banks and firms, which resulted in the introduction of a special administration regime (“SAR”) earlier this year.

There are essentially three types of insolvency proceeding: liquidation, receivership and administration. Liquidators realise and distribute a company’s assets before dissolving the company. Receivers usually realise certain secured assets to repay certain debts, before appointing a liquidator. However, an administrator’s first objective is to rescue the company as a going concern. It is only if this is not practicable that the administrator can realise and distribute a company’s assets.