Over the past few months, Delaware courts have continued to address important M&A and corporate issues. Significant corporate law developments have also arisen from state and federal courts in California. Below are some highlights and practical takeaways related to important developments in Delaware law.

CORPORATE

Advance Notice Bylaws and Board Action Affecting the Stockholder Franchise.

In this week’s TGIF, we examine the recent case of Mandalinic v Stone (Liquidator) [2023] FCAFC 146 which provides useful guidance as to the ability of a director to challenge an insolvent company’s PAYG liability.

Key takeaways

Where a bankruptcy order is set aside after a successful appeal by the debtor, who should be liable for the fees and expenses of the trustees in bankruptcy (whether the Official Receiver (as provisional trustee) or trustees appointed by the creditors)? Should such fees and expenses be borne by the bankruptcy estate, or should the unsuccessful petitioner bear those costs on the basis the bankruptcy order ought not to have been made in the first place?

The Court of Appeal has given valuable and clear guidance on the circumstances in which applications during an ongoing liquidation may constitute ‘final decisions’ for the purpose of bringing appeals to His Majesty in Council pursuant to the Virgin Islands (Appeals to Privy Council) Order 1967 ( the “1967 Order”). The issue can be an important one in practice – final decisions only require formal or procedural permission to appeal, whereas non-final decisions require substantive permission, based on merit or public importance.

Introduction

In commercial contracts, it is not uncommon to find provisions allowing for contractual discretion on the part of one or more parties, such as the discretion to vary certain interest or payment terms, to choose a port of delivery, or an option to purchase. While such provisions give a certain amount of decision-making power to the party that has been conferred the discretion, they are not without limit. These limits were explored in the Singapore High Court decision of Maybank Singapore Ltd v Synergy Global Resources Pte Ltd [2023] SGHC 258.

What rate of interest should a debtor pay under a bankruptcy plan?

Even if the statutory conditions for cramming down the votes of dissenting creditors has been met, the court retains a discretion to consider other factors

Certain statutory conditions need to be met in order for the court to sanction a plan at least one class of creditors or members has not voted in favour of the plan by the requisite majority (being 75% in value of those present and voting) – referred to as the "cross-class cram down".

In an eagerly-awaited and significant decision, the Supreme Court, in R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28 (“PACCAR”), held, on 26 July 2023, that litigation funding agreements (“LFAs”) under which a litigation funder receives a percentage of any damages recovered by the claimant are damages-based agreements (“DBAs”) within the meaning of section 58AA of the Courts and Legal Services Act 190 (“CLSA”).

Executive Summary

Investors in LMA-based intercreditor agreements¹ (ICA) should be reassured by the commercial approach recently taken by the High Court in construing the "Distressed Disposal" provisions (DD Provisions).

Insolvency practitioners and other potentially affected stakeholders, such as company directors and corporate trustees, should watch this space carefully to keep abreast of any changes to their obligations.