Several significant judicial decisions and legislative updates occurred in 2023 that are relevant to commercial lenders, businesses and restructuring professionals. This bulletin summarizes the key developments of 2023 and highlights areas of significance to be aware of in 2024.
1. Priority Scheme
In 2023, several cases and legislative updates raised important questions regarding the priority scheme in insolvency proceedings.
Environmental Priorities
On April 12, 2024, the U.S. Supreme Court issued an important decision in the case of Macquarie Infrastructure Corp. v. Moab Partners, L.P., No. 22-1165. Justice Sotomayor, writing for a unanimous Court, ruled that “pure omissions are not actionable under Rule 10b-5(b).” In other words, a pure omission (i.e., where a speaker says nothing) cannot support a private claim under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b–5, even if such an omission could constitute a violation of Item 303 of Regulation S-K (“Item 303”).
In a recent legal development that underscores the intricate interplay between federal bankruptcy law and the cannabis industry, a court case has emerged involving a bankruptcy filing by an employee of a cannabis company. It’s well established that, because cannabis is generally considered a controlled substance under the federal Controlled Substances Act (CSA), certain cannabis related companies are precluded from obtaining debt relief through bankruptcy. Now individuals employed by cannabis companies might find themselves in the same boat. In Blumsack v. Harrington, 2024 Bankr.
Dispute Resolution analysis: An application by the former administrators of a company for an increase in their remuneration has been dismissed, despite the Court concluding that they had standing to bring the application itself.
Frost and another v The Good Box Co Labs Limited and others [2024] EWHC 422 (Ch)
What are the practical implications of this case?
In Foo Kian Beng v OP3 International Pte Ltd (in liquidation) [2024] SGCA 10 (OP3 International)1 the Singapore Court of Appeal considered the trigger for when the director's duty to consider the interests of creditors is engaged (referred to in the judgment as the Creditor Duty).
The Court held that:
This article will survey the structural, strategic, and tactical ways by which a major corporate defendant may successfully manage its way through the particularly American corporate challenge of being targeted by the plaintiffs' bar in mass tort filings. I have spent most of my professional career trying to answer this question. Over the last 22 years, my company, KCIC, has focused on providing services to corporations in managing mass-tort liabilities and maximizing their related insurance assets.
The opinion is Bruce v. Citigroup Inc., Case No. 22-1000, decided August 2, 2023, by the U.S. Second Circuit Court of Appeals.
The opinion addresses this question:
In the recent decision in Blockchain Group Company Limited (in liquidation) v. PKF Hong Kong Limited1, Le Pichon DHCJ decided that despite an error resulting in a protective writ naming the defendant as a limited company and formerly a firm, the relevant provisions to amend a party’s name could not be used to essentially replace the limited company with the firm.
A disclosure statement and a plan are critical documents in Chapter 11 cases, representing the culmination of a case and a roadmap of the debtor's path forward. A Chapter 11 plan can be either a plan of reorganization, pursuant to which a debtor emerges from bankruptcy as a new, reorganized entity, or a plan of liquidation, pursuant to which a debtor's remaining assets are liquidated and the proceeds are distributed to creditors. Plans of liquidation are common in Chapter 11 cases, where the debtor sells substantially all of its assets.