Several industry associations (ISDA, BBA and FOA – the futures and options association) have responded to a Treasury informal consultation on the need to carve out from English insolvency law the porting of clearing clients’ positions and margin. They agree on the need to ensure certainty around the porting option when a clearing member becomes insolvent. EMIR’s porting option should also apply where the clearing member is acting through back-to-back transactions and holds the client’s margin. The associations note that porting should be subject to agreement.

FSA has published a set of frequently asked questions designed to help readers understand MG Global’s insolvency position and investors’ rights under it. (Source: MF Global Investors – Your Questions Answered)

FSA has published three consultation papers on the Retail Distribution Review (RDR). The papers cover:

TheBankruptcy and Insolvency Act, RSC 1985, c. B‐3 (the “BIA”) was recently amended to repeal the settlement and reviewable transaction sections of the Act, and replaced these sections with provisions regarding transfers under value and preferences. The aim of these new provisions is to prevent bankrupts from unfairly preferring certain creditors over others and to prevent bankrupts from transferring assets for significantly less than they are worth.

In the recent decision of Century Services Inc. v. Canada (Attorney General), 2010 SCC 60, the Supreme Court of Canada has, for the first time, interpreted key provisions of the Companies’ Creditors Arrangement Act (“CCAA”).

The judgment of the Court, which was pronounced December 16, 2010, overrules appellate authority from Ontario and British Columbia that previously conferred a priority for unremitted GST on the Crown in CCAA proceedings, and endorses the broad discretionary power of a CCAA court.

There has been an upturn in the frequency of trade finance workouts, restructurings and formal insolvencies. Drew Sainsbury looks at some key issues that banks face when trade finance lending passes to “bad bank”.

The bank’s decisions at every stage of a trade finance transaction are critical: at origination; when following a workout/restructuring; and once a formal insolvency process becomes a reality.

Origination

On October 13, 2009, Arclin Canada Ltd./Arclin Canada Ltee. (“Arclin”), who is restructuring under CCAA proceedings and whose American affiliates are restructuring under Chapter 11 of the U.S. Bankruptcy Code, sought the approval of key employee retention program (“KERP”) agreements with its Chief Executive Officer and its Chief Financial Officer, and sought sealing orders with respect of the agreements. The KERP was approved by Justice Hoy. The following are some noteworthy points from this case.

Treasury has amended the Financial Markets and Insolvency (Settlement Finality)(Amendment) Regulations 2009 to make the Regulations reflect changes to insolvency and company law that followed the original regulations. The changes take effect on 1 October 2009.

TrustIn Canada (Deputy Attorney General) v. Temple City Housing Inc., the Alberta Court of Appeal had to consider an application for leave to appeal a provision in a Companies Creditors Arrangement Act (Canada) (“CCAA”) order granting a DIP lender a charge in priority over the claims of CRA. The claims of CRA consisted of deemed trust claims arising under sections 224(1.2), 227(4) and 227(4.1) of the Income Tax Act (Canada).

In Seeley (Trustee of) v. Canadian Imperial Bank of Commerce (2008), the Bankruptcy Court determined that the Superintendent’s Levy was payable on the amount paid to a secured creditor by a Trustee in bankruptcy.The bankrupt made an assignment into bankruptcy. He owned a cabin which was mortgaged to the Bank.

The Trustee sent the Bank three notices requiring it to file proof of its security. The Bank did not respond.The cabin was sold and subsequently the Bank filed a Proof of Claim in the bankruptcy.