The Polyvocal Court
Two and a half years after the beginning of the COVID-19 crisis, and on the verge of an economic recession, important developments are emerging in Spanish insolvency law.
The process of bankruptcy or insolvency may involve a company selling business assets in order to pay creditors or simply to remain financially liable. In some cases, this may include selling distressed assets. This article explains what a distressed asset is, how to deal with such an asset, and what may be the ramifications of engaging in this process.
What is a distressed asset?
In its decision in Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd., a bench of three Judges of the Supreme Court held that “Harmonious construction of clause (10) of Section 3 of the I&B Code read with clauses (20) and (21) of Section 5 thereof would reveal, that even a claim in respect of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority would come within the ambit of ‘operational debt’.
The director of an insolvent company appealed a restriction order made against him. The order prevented the appellant from acting as a company director or secretary for a 5-year period under section 819 of the Companies Act 2014 (the “2014 Act”). The Court of Appeal dismissed the appeal as the appellant failed to satisfy the court that he acted responsibly in the conduct of the company’s affairs.
Introduction
On July 7, 2022, the UK Insolvency Service, an executive agency of government responsible for a variety of roles in administering the UK insolvency regime, published a consultation on the UK’s proposed adoption of two UNCITRAL Model Laws on insolvency, inviting responses (the “Consultation”).
The Supreme Court has held that if the Resolution Plan ignores the statutory demands payable to any State Government or legal authority, the Adjudicating Authority is bound to reject the same.
The Apex Court in State Tax Officer v.Rainbow Papers Limited [Judgement dated 6 September 2022] was of the view that the Committee of Creditors, which might include financial institutions and other financial creditors, cannot secure their own dues at the cost of statutory dues owed to any Government or Governmental Authority or for that matter, any other dues.
The struggles of failing marijuana businesses to wind down and pay creditors in an orderly fashion serve no one. Among the problems marijuana businesses face such as lack of access to banking and onerous taxation stemming from IRC 280E is the lack of access to bankruptcy proceedings.