Corporate Enforcement Authority Issues Helpful Guidance Note

The Preventative Restructuring Directive

In July 2022, the European Union (Preventive Restructuring) Regulations 2022 (the Regulations) transposed the requirements of EU Directive 2019/1023 (the Preventative Restructuring Directive) into Irish law.

Certain of the consequential amendments to the Companies Act 2014 (the Act) relate to the duties and responsibilities that directors of companies have in circumstances of financial difficulty and/or insolvency.

It is difficult to predict what 2023 might hold for businesses in the UK. Given the difficult economic environment, many will already be facing a challenging start to the year. Although the challenges of the pandemic (such as lock downs) have gone, others have materialised. Energy price hikes and inflation rises continue to make trading conditions tough.

Since the United Kingdom implemented the National Security and Investment Act in January 2022 ("NSI Regime"), there has been a significant increase in state intervention in, and review of, business transactions in the United Kingdom, including for international transactions involving targets with limited activities in the United Kingdom.

Under Section 101(54) of the bankruptcy code, any means of disposing with an interest in property is considered a transfer, and therefore, under certain circumstances, may be avoided as a preference or fraudulent transfer. In a recent unpublished opinion, the Third Circuit addressed the scope of the provisions. The Third Circuit recently held that prepetition lease termination did not give rise to a transfer.

Background

As 2022 drew to a close, a Delaware bankruptcy court approved a settlement between PhaseBio Pharmaceuticals and SFJ Pharmaceuticals over their ill-fated drug development financing partnership. This court approval ended a legal saga that began two years ago, when PhaseBio, a public biopharmaceutical company developing a novel drug to control bleeding in certain patients, entered into an agreement with SFJ, a company that finances and supports drug development, to fund up to $120 million to advance PhaseBio’s pivotal Phase III trial for the drug.

On January 4, 2023, Judge Glenn of the United States Bankruptcy Court for the Southern District of New York issued a much-awaited decision in the Celsius Network LLC (along with its affiliated debtors, “Celsius” or the “Debtors”) chapter 11 cases relating to the ownership of crypto assets deposited by customers in the Celsius “Earn” rewards program accounts.

This guide should not be relied on as a definitive guide to the legislation and should not be relied on as legal advice. The particular circumstances of any situation will need to be considered to determine if the overseas entity is one that is captured by the legislation, if the estate is a qualifying estate, and whether the beneficial owners need to be registered. As a result, this guide is intended only as a high-level overview.

This guide covers the position of property and land situated in England and Wales only.

What is the Register of Overseas Entities?

The Ontario Fraudulent Conveyances Act¹ (the FCA), a concise statute of long-standing that traces its history to an English statute of 1571, is intended to prevent conveyances of property made with the intent to defeat, hinder, delay or defraud “creditors or others” of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures.

In 2020, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule (“Rule”) that amends Regulation F, 12 C.F.R. part 1006, the Fair Debt Collection Practices Act (the “FDCPA”). The Rule became effective on November 30, 2021. Because the FDCPA was implemented over four decades ago, the Rule is designed to interpret and further the goals of the FDCPA in present day. The Rule places additional restrictions on debt collection practices and addresses communications regarding debt collection.

Scope of the Rule

Whose crytpo is it? With the multiple cryptocurrency companies that have recently filed for bankruptcy (FTX, Voyager Digital, BlockFi), and more likely on the way, that simple sounding question is taking on huge significance. Last week, the Bankruptcy Court for the Southern District of New York (Chief Judge Martin Glenn) attempted to answer that question in the Celsius Network LLC bankruptcy case.