The implementation of restrictions on stock and/or claims trading has become almost routine in large chapter 11 cases involving public companies on the basis that such restrictions are vital to prevent forfeiture of favorable tax attributes that can be triggered by a change in control. Continued reliance on stock trading injunctions as a means of preserving net operating loss carry forwards, however, may be problematic, after the controversial ruling handed down in 2005 by the Seventh Circuit Court of Appeals in In re UAL Corp.

Europe, the U.S. and Canada—On 7 May 2013, the US Bankruptcy Court for the District of Delaware denied a motion by European creditors of Nortel Networks Corp. ("Nortel") to certify a direct appeal to the U.S. Court of Appeals for the Third Circuit of the bankruptcy court's 3 April 2013 ruling (Inre Nortel Networks, Inc., Case No. 09-10138 (KG), 2013 BL 92666 (Bankr. D. Del. Apr.

The ability to sell an asset in bankruptcy free and clear of liens and any other competing “interest” is a well-recognized tool available to a trustee or chapter 11 debtor in possession (“DIP”). Whether the category of “interests” encompassed by that power extends to potential successor liability claims, however, has been the subject of considerable debate in the courts. A New York bankruptcy court recently addressed this controversial issue in Olson v. Frederico (In re Grumman Olson Indus., Inc.), 445 B.R. 243(Bankr. S.D.N.Y. 2011).

Although it has been described as an “extraordinary remedy,” the ability of a bankruptcy court to order the substantive consolidation of related debtor-entities in bankruptcy (if circumstances so dictate) is relatively uncontroversial, as an appropriate exercise of a bankruptcy court’s broad (albeit nonstatutory) equitable powers. By contrast, considerable controversy surrounds the far less common practice of ordering consolidation of a debtor in bankruptcy with a nondebtor.

Ever since the establishment of the U.K. Pensions Regulator (the "Regulator") by the U.K. Pensions Act 2004 (the "Act"), the Regulator's exercise of its authority has been of major importance to the U.K.'s restructuring and rescue business. The first judicial review of the Regulator's powers, however, hints that some of the procedures it has adopted may be curbed in the future.

The Pensions Regulator and the Restructuring Environment

In a recent decision, Judge Mary F. Walrath of the United States Bankruptcy Court for the District of Delaware greatly limited debtors’ ability to release parties under a chapter 11 plan in the bankruptcy cases of Washington Mutual, Inc. (“WMI”), and its debtor affiliates (together with WMI, the “Debtors”). In In re Washington Mutual, Inc., Judge Walrath approved a global settlement agreement (the “Global Settlement”) reached by the Federal Deposit Insurance Corporation (“FDIC”) as receiver for Washington Mutual Bank (“WaMu Bank”); JPMorgan Chase Bank, N.A.

Administrations, including "pre-packs", are not capable of constituting "insolvency proceedings...instituted with a view to the liquidation of the assets of the transferor" within the meaning of Regulation 8(7) of TUPE. Where there is a sale of an undertaking by an administrator, the employees assigned to the undertaking will automatically transfer to the buyer and receive unfair dismissal protection.

Key facts

Despite the downturn in many retail sectors, retailers should not automatically adopt a “glass half empty approach” but instead view the impending cycle as creating opportunities for companies in both the U.S. and globally.

Pre-pack administrations are becoming more common. Four Holdings' purchase of Agent Provocateur illustrates the attraction of pre-packs — the ability to cherry-pick the best assets, acquire the goodwill of a well-known business that continues to trade, and retain its key staff without having to take on liabilities to creditors —and why existing management is likely to be supportive.

Editor’s Note: This is a new one for us at The Bankruptcy Cave. We are starting a series of primers, covering a narrow range of law but with more depth than just “here’s a recent case.” And also, we have our first edition of “The Bankruptcy Cave Embedded Briefs” – top quality briefs on a certain issue, feel free to download to your own form files or come back and grab ’em when you need ’em. Let us know what you think – we are always trying to improve things around here for our readers.