Businesses large and small have been affected by the coronavirus crisis. It seems that no industry has been spared economic hardship. As many states prepare to reopen their economies, there are some businesses that will not be able to resume operations—it is too little, too late. Even with massive spending by the federal government to counteract the economic downturn, it appears that a large number of business bankruptcies may be on the horizon.
TABLE OF CONTENTS
COVID-19: Summary of Key Issues.................................................................................... 1
The global economy has suffered a massive hit from the COVID-19 pandemic. The collective impact of disruptions to supply chains and falling consumer demand have caused many businesses to suffer varying degrees of financial stress with some having to recapitalise or refinance. Mergers and acquisitions (M&A) activity has been brought to a virtual standstill with many deals halted or delayed.
The global economy has suffered a massive hit from the COVID-19 pandemic. The collective impact of disruptions to supply chains and falling consumer demand have caused many businesses to suffer varying degrees of financial stress with some having to recapitalise or refinance. While some M&A transactions on foot prior to the onset of the pandemic have been disrupted or delayed, the impact of the pandemic will open up opportunities for cashed-up funds and other buyers to, in time, take advantage of strategic and investment opportunities presented by the pandemic.
A recent New York Timesarticle highlights what it calls a “tidal wave of business bankruptcies” that are coming due to financial fallout from the COVID-19 pandemic. A number of high profile businesses have already declared bankruptcy, including J.C. Penney, Hertz, J. Crew, Neiman Marcus, 24-Hour Fitness, Borden Dairy, and Pier 1 Imports. More are sure to follow.
The ability of a bankruptcy trustee or chapter 11 debtor-in-possession ("DIP") to sell assets of the bankruptcy estate "free and clear" of "any interest" in the property asserted by a non-debtor is an important tool designed to maximize the value of the estate for the benefit of all stakeholders. The U.S. Bankruptcy Court for the Central District of California recently examined whether such interests include "successor liability" claims that might otherwise be asserted against the purchaser of a debtor's assets. In In re Catalina Sea Ranch, LLC, 2020 WL 1900308 (Bankr. C.D. Cal.
The impact of COVID-19 is yet to be fully realized, and many companies are yet to consider restructuring as a means to survive the pandemic, but all companies and all creditors can benefit now from learning how employee matters are treated in a bankruptcy proceeding under chapter 11 of the U.S. Bankruptcy Code (as amended, the Bankruptcy Code). This blog provides a high-level overview of some of the most material matters affecting an employee workforce in the context of a chapter 11 restructuring.
TAX CONTROVERSY AND LITIGATION NEWSLETTER
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Focus on Tax Controversy
NOVEMBER 2020\\VOLUME 4\\ISSUE 3
IN THIS ISSUE
ARTICLES AND UPDATES Bankruptcy Court's Jurisdiction To Resolve Tax Claims2 FAQs Issued Under The CARES Act Invalid Under The APA8 Tax Court Concludes IRS Failed to Satisfy 675111
Penalty For Failure To File Form 5471 Is Not Divisible 14 Sixth Circuit Rejects Taxpayer's Judicial Estoppel Claim17
ABOUT US Winston & Strawn's Tax Controversy and Litigation Practice 20
Editors 20
In the wake of the recent economic downturn caused by the COVID-19 pandemic, there will likely be a sharp rise in bankruptcy filings by businesses seeking to obtain relief from the burdens of excessive debt.[1] The bankruptcy code is designed to provide debtors relief and protection from creditors, which includes the Internal Revenue Service (“IRS”). One of the benefits of bankruptcy court protection is the automatic stay, which will