How does the objective of achieving payment for creditors in insolvency interact with the objectives of pension legislation, which seeks to ensure that individuals are adequately provided for in retirement? The courts in New Zealand and in the UK have each recently grappled with this issue. In both of the recent cases considered in this article the pensions objectives won out and the specific pension funds in question were not made available for the bankrupt individual's creditors.

The Supreme Court of Canada’s decision inSun Indalex Finance, LLC v United Steelworkers, 2013 SCC 6, has a number of implications for employers, pension plan administrators, as well as both secured and unsecured creditors.

The Supreme Court of Canada’s decision in the case of Re Indalex Ltd. [2013] SCC 6 (the “Decision”) does not, as one national newspaper put it place “creditors before pensioners”. The Decision which overturned the Ontario Court of Appeal’s decision in Re Indalex Ltd. [2011] O.J. No.

The Federal Labour Court (Bundesarbeitsgericht – BAG) has ruled on 18 May 2021 (docket number 3 AZR 317/20) that in the case of the PSV’s assertion of claims against the insolvency administrator of an insolvent company, it is not the balance sheet interest rate used for the calculation of the pension provisions that is applicable, but the standard statutory interest rate according to section 246 German Civil Code (BGB). Only this interest rate is decisive for the calculation of the amount of claims.

Facts / Background:

By judgment of 26 January 2021 (docket number: 3 AZR 878/16, 3 AZR 878/17) the Federal Labour Court (Bundesarbeitsgericht – BAG) has ruled that the acquirer of an insolvent company is only liable for vested entitlements and claims to occupational pension that had been earned after the opening of insolvency proceedings. He is not liable for the pension based on periods before, even if the German Insolvency Protection Fund (PSV) does not fully cover this part of the pension.

Facts / Background:

The Corporate Insolvency and Governance Act 2020 makes the most significant changes to UK insolvency law in a generation. It had a rapid passage through the UK parliamentary process, making its way from first publication on 20 May 2020 to Royal assent on 25 June 2020 in just over five weeks. This article provides a brief overview of the key measures introduced by the Act (both permanent and temporary) and summarises the amendments made to the Act during its progress through parliament. It also provides links to our further, more in-depth, analysis.

The new UK Restructuring Plan

The Corporate Insolvency and Governance Act, which received Royal Assent on 25 June 2020, contains a range of significant reforms, not least of which is the introduction of a new Restructuring Plan process. Together with the sweeping changes that the Act has in its sights, the Restructuring Plan and associated changes are aimed at improving the tools for companies to be effectively and efficiently rescued.

Key takeaways

The Corporate Insolvency and Governance Act 2020 has introduced a new standalone moratorium procedure for companies.¹ The moratorium is part of a package of significant legislative reforms contained in the Act, intended to enhance the UK’s restructuring rescue culture. These were originally consulted on between 2016 and 2018 and were fast-tracked to deal with the COVID-19 pandemic.

Overview

The Corporate Insolvency and Governance Bill has been described as an “extraordinary Bill for extraordinary times” . First published on 20 May 2020, it has had a rapid passage through the UK parliamentary process, so it could become law (an Act of Parliament) by the end of June. At the time of writing, the Bill is almost at the end of its parliamentary journey with only one final stage outstanding - a return to the House of Commons for a consideration of amendments - before it is sent for Royal Assent and becomes law.

Claims held by employees of a Chapter 11 debtor based on “restricted stock units (‘RSUs’) … must be subordinated [under Bankruptcy Code § 510(b)] to the claims of general creditors because … (i) RSUs are securities, (ii) the claimants acquired them in a purchase, and (iii) the claims for damages arise from those purchases or the asserted rescissions thereof,” held the U.S. Court of Appeals for the Second Circuit on May 4, 2017. In re Lehman Brothers Holdings, Inc., 2017 U.S. App. LEXIS 7920, *6 (2d Cir. May 4, 2017).