This week’s TGIF considers Re Legend International Holdings Inc (In liq) [2018] VSC 789, the next chapter in the story of Legend International Holdings Inc, where the Court found a company to be insolvent on the basis of a foreign debt.

Courts have broad discretion to grant orders under s. 18.6 of the CCAA in cases where there is no formal Canadian bankruptcy filing.

Magna Entertainment Corp. (“MEC”) is a publicly-traded Delaware corporation with its head office in Ontario. On March 5, 2009, MEC and certain of its U.S. subsidiaries filed for Chapter 11 protection in the United States. Although MEC’s management is based in Canada and MEC has assets in Canada, MEC’s main interests and majority presence are in the U.S.

Lear Corporation, a Delaware corporation, its Canadian subsidiaries, and other affiliates, sought an Order under s. 18.6 of the Companies’ Creditors Arrangement Act (“CCAA”) for a declaration that Chapter 11 proceedings in the U.S. Bankruptcy Court (New York) constituted “foreign proceedings” and for a stay of proceedings. Introduced to the CCAA in 1997 to assist with the administration of the increasing number of cross-border insolvencies, s.18.6 is aimed at increasing cooperation, comity, and coordination between courts of different jurisdictions.

Magna Enterprises Corp. (“MEC”), a foreign bankrupt corporation, brought an application for ancillary relief pursuant to s. 18.6 of the CCAA. Section 18.6 gives the court the power to “make such orders and grant such relief as it considers appropriate to facilitate, approve or implement arrangements that will result in a co-ordination of proceedings under this Act with any foreign proceeding”.

On May 22, 2018, the United States Court of Appeals for the Fifth Circuit issued its decision in Franchise Services of North America v. United States Trustees (In re Franchise Services of North America), 2018 U.S. App. LEXIS 13332 (5th Cir. May 22, 2018). That decision affirms the lower court’s holding that a “golden share” is valid and necessary to filing when held by a true investor, even if such investor is controlled by a creditor.

In, In re: Geneius Biotechnology, Inc., C.A. No. 2017-0297-TMR (Del. Ch. Dec. 8, 2017), the Delaware Court of Chancery denied a minority stockholder’s petition for the appointment of a neutral third-party receiver under Section 291 of the Delaware General Corporation Law (“DGCL”) because the petitioner minority stockholder failed to prove, by clear and convincing evidence, that Geneius Biotechnology, Inc. (“Geneius”) was insolvent. The court held that Section 291 actions are not to be used as a method of resolving business strategy disputes between stockholders and management.

In B.E. Capital Management Fund LP v. Fund.Com Inc., C.A. No. 12843-VCL (Del. Ch. October 4, 2017), the Delaware Court of Chancery denied an appeal from a receiver’s decision disallowing a claim for breach of contract against a company in receivership. The Court held that the appropriate standard of review for an appeal of a receiver’s decision was de novo as to both law and facts, and in particular, that the Court had discretion to consider additional evidence not presented on record to the receiver.

In a recent ruling, Trusa v. Nepo(Del. Ch. April 13, 2017), consistent with prior case law, Vice Chancellor Montgomery-Reeves of the Delaware Chancery Court held that a creditor cannot bring a derivative action against a Delaware limited liability company, even where the company is clearly insolvent. The ruling is interesting, because in the well-known case of North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, 930 A.2d 92 (Del.

In Dore v. Sweports, Ltd., C.A. No. 10513-VCL (Del. Ch. January 31, 2017), plaintiffs John A. Dore, Michael J. O’Rourke, and Michael C. Moody (together, “Plaintiffs”) sought indemnification under the Delaware General Corporation Law (“DGCL”) and corporate bylaws, for expenses incurred in connection with three legal proceedings that occurred in Illinois, as well as those incurred enforcing their indemnification rights in Delaware.

Background

In this memorandum opinion, the Court of Chancery granted plaintiffs’ motion to amend their complaint in part, and denied their motion to appoint a receiver for Advance Realty Group, LLC, a Delaware limited liability company (“ARG”) conducting business as a real estate investment and development company. Plaintiffs, all of whom are members of ARG, initially brought claims for breach of fiduciary duty and contract against ARG and the other defendants, which include members of ARG’s managing board (the “Board”), its senior management, and its principal investors.