Ben Gold, partner in RPC’s professional and financial risk team, explains how a recent Supreme Court case (BTI v Sequana) confirms company directors owe a duty to creditors if the company nears balance sheet or cash flow insolvency.
This ‘creditor duty’ is of increasing significance as insolvencies rise.
The Bankruptcy and Diligence (Scotland) Bill proposes to introduce measures designed to help those in financial difficulty and suffering with mental health problems to get some much needed "breathing space".
The English Court has refused to sanction two separate restructuring plans proposed by Nasmyth Group Limited (Nasmyth) and The Great Annual Savings Company Ltd (GAS). Both companies sought to use Part 26A of the Companies Act 2006 to “cram down” His Majesty’s Revenue and Customs (HMRC). Whilst neither decision is the first time that Part 26A has been used in this way1, they are the first to involve any active participation by HMRC in the sanction hearing2.
A recent amendment to the Goods and Services Tax Act 1985 has clarified that voluntary administrators are personally liable for the GST of companies under their administration.
What can we say about the outcome of the GAS (Great Annual Savings Company Limited) sanction hearing that hasn’t already been reported?
It’s impossible not to comment on the fact that the plan was not sanctioned, and as a consequence of fierce opposition from HMRC that it avoided cram down. Nor that the court refused to sanction the plan on the basis that the conditions for cram down were not met – the court was not satisfied that HMRC would be better off under the plan and even if it were the judge said he would have not exercised his discretion to cram down.
The original version of this article was first published in the Trilegal Quarterly Roundup.
Key Developments
1. SEBI prescribes new disclosure requirements and dos and don’ts for the issue of green debt securities
Is a debtor “engaged in commercial or business activities” for Subchapter V eligibility?
Such question has been addressed on many occasions and by many courts.
The trend seems to be toward a conclusion that the nature and quantity of “commercial or business activities” required for Subchapter V eligibility is this:
- Nature = “easily met”; and
- Quantity = “not much.”
The latest opinion to confirm the trend is In re Robinson, Case No. 22-2414, Southern Mississippi Bankruptcy Court (issued April 17, 2023; Doc. 90).
A bankruptcy petition should not proceed if the debt is disputed and subject to an exclusive jurisdiction clause in favour of a foreign court.
The original version of this article was first published in the Trilegal Quarterly Roundup.
Key Developments
1. Delhi High Court pierces the corporate veil to make non-parties to an arbitration liable for the arbitral award
In a rare move against long-standing precedent, the Bankruptcy Court for the Southern District of New York recently reversed course in its district on calculating allowed damages when debtor-tenants in bankruptcy reject commercial leases. This decision could limit landlords’ damage claims if those rejected leases are long term and contain rent escalation clauses. The case, In re Cortlandt Liquidating LLC, et al. Case No. 20-12097-MEW (Bankr. S.D.N.Y. Feb.