In response to an imminent Order of Liquidation against the Kemper Insurance Companies, we have prepared the following “frequently asked questions” guide summarizing issues related to: (i) the financial regulation of insurance companies; (ii) the liquidation and proof of claim process in Illinois; (iii) potential recovery by policyholders of the amount of “covered” workers’ compensation claims from state guaranty associations; (iv) policyholder collateral; and (v) planning a response to the Kemper liquidation.1

I. FINANCIAL REGULATION OF INSURANCE COMPANIES

On September 18, 2009, amendments (the "Amendments") to the Companies’ Creditors Arrangement Act (the "CCAA") and Bankruptcy and Insolvency Act (the "BIA") came into force.

Vanquish Oil & Gas (“Vanquish”), now in receivership, was a trustee under a joint operating agreement for an oil well. It was required to remit 45% of the well’s net production proceeds to a proportional owner - either Karl Oil and Gas Ltd. or Choice Resources Corporation (who disputed the entitlement at the time).

The U.S. doctrine of equitable subordination (as now set out in the U.S. Bankruptcy Code) allows a U.S. court to subordinate all or part of a creditor's claim to the claims of other creditors if the creditor has engaged in inequitable conduct that gives the creditor an unfair advantage or is injurious to the other creditors. Will the Canadian courts apply the doctrine?

In Stomp Pork Farm Ltd., Re, (“Stomp Park Farm”) the Saskatchewan Court of Appeal partially overturned orders granted from the Saskatchewan Court of Queen’s Bench which approved debtor in possession financing (“DIP Financing”).

In this case, the debtor owed its first lender $20.5 million, secured against the debtor’s current assets. The lender had priority over the current assets to the extent of $18 million and thereafter shared priority with the debtor’s second lender.

On June 5 2008 the Ontario Superior Court of Justice approved a plan concerning failed assetbacked commercial paper (ABCP). The restructuring called for in the plan can therefore proceed immediately, subject to any appeals from the court approval. This update is a brief survey of the key developments in the efforts to rescue the affected Canadian market for ABCP, which broke down in August 2007.

Breakdown of Market and the Montreal Accord

Today, new legislation comes into force* that provides directors of companies in financial difficulty with a second breathing space from the financial impact of the wrongful trading provisions.

The English High Court in Telnic Ltd v Knipp Medien Und Kommunikation GmbH [2020] EWHC 2075 (Ch) has confirmed that the court has discretion to restrain a winding-up petition against debtor's when the debt is governed by an arbitration agreement.

Knipp Medien Und Kommunikation GmbH (Knipp) appealed against an order to stay its winding-up petition against Telnic Limited (Telnic). Telnic also brought a cross-appeal seeking orders that Knipp's petition be dismissed rather than stayed.

In Re A Company (injunction to restrain presentation of petition) [2020] EWHC 1406 (Ch), the Court held that it is able to take into account the likelihood of a change in the relevant law in deciding whether to restrain a winding up application from being brought.

Bloomberg reported last month that the Madoff bankruptcy has one more big case to go, chasing USD3.2b held by foreign banks (see our related story above). Mr Picard, the bankruptcy trustee, has reportedly recovered over USD14b of the USD17.5b in losses arising from Madoff's Ponzi scheme.