In the current economic climate, more and more companies are getting into financial difficulties, informal workouts by debtor companies, with support from certain creditors, seem to be increasingly common.
Under the Insolvency Act 1986 (IA 1986), office-holders are given wide powers but they are subject to the control of the court. In order to allow insolvency practitioners to carry out their duties efficiently and without having constantly to look over their shoulders, this control has always been exercised with a light touch. In recent years there have been several important cases examining these issues.[1]
The National Company Law Appellate Tribunal, Principal Bench, New Delhi (“NCLAT”) has in the case of SVA Family Welfare Trust & Anr v. Ujaas Energy Limited & Ors inter alia held that a resolution plan can contain a clause which extinguishes security interest, such as personal guarantees, after paying compensation to the financial creditor in whose favour such security interest was created.
The Eighth Circuit held that “avoidance actions [e.g., preferences, fraudulent transfers] can be sold as property of the [Chapter 7 debtor’s] estate.” In re Simply Essentials, LLC, 2023 WL 5341506, *1 (8th Cir. Aug. 21, 2023). On a direct appeal from the bankruptcy court, the court affirmed the bankruptcy court’s granting of the trustee’s motions to compromise and sell property under Bankruptcy Code §363(f). A creditor had objected, arguing unsuccessfully that “avoidance actions… are not part of the bankruptcy estate ….” Id.
INTRODUCTION
One of the biggest changes brought in by the Insolvency and Bankruptcy Code, 2016 (“Code”) was the demarcation between treatment of interest vis-à-vis financial debt and operational debt. Over time, Courts have interpreted the Code with the aim to strengthen the foundation and resolve uncertainties. One such exercise, which has greatly impacted the insolvency regime, is the inclusion of interest in operational debt.
PHASE 1 – EXCLUSION OF INTEREST
Executive Summary
In a radical departure from settled case law, the English High Court has eroded the protections of English law creditors guaranteed by the Rule in Gibbs1 .
This week’s Dekagram examines what happens when rules change: that transitional period between one set of rules and another, when no one is quite sure what’s happening. We seem to have had quite a few of those recently; just as we were getting over the horrors of the Withdrawal Act, along came the changes to the Fixed Recoverable Costs regime – changes which, we remind readers, remain in a state of flux, notwithstanding that the new regime is now in force.
Res Judicata and Rule Changes
The Privy Council has considered the question of whether an agreement to settle disputes arising out of a shareholders' agreement by arbitration prevents a party to the agreement pursuing a petition to wind up the company on just and equitable grounds.
Background
Many authorities and commentators have considered cryptocurrencies, and the blockchains that undergird them, as a potentially disruptive force in the financial industry. Now, that disruption has made its way to a different side of finance—bankruptcy, and during the past year, the United States bankruptcy courts have had to confront many unexpected challenges involved in dealing with cryptocurrency.
On October 3rd, 2023, the Ministry of Corporate Affairs (MCA) amended Section 14(1) of the Insolvency and Bankruptcy Code, 2016 thereby exempting the transactions, arrangements, or agreements related to aircraft, aircraft engines, airframes, and helicopters in the aviation industry from the operation of the moratorium imposed upon the admission of an insolvency plea.