The United Kingdom Supreme Court has just released an important insolvency judgment in BTI 2014 LLC v Sequana SA [2022] UKSC 25 (Sequana), which concerns when and the extent to which directors of a company must consider the interests of creditors.

In Short

The Situation: Insolvency officeholders increasingly find their investigations into a company's affairs frustrated by the comingling of records on a "group" server. Claims to privilege by other group entities (or even third parties) are then advanced as an obstacle to delivering company records to the officeholder, leading to expensive and logistically complex inspection and review processes that can be a burden on insolvent estates.

In Short

The Situation: Directors in England and Wales owe duties to the companies to which they are appointed (and may face personal liability for breaching such duties). Although the Companies Act 2006 obliges directors to maximise value for a company's shareholders, case law has suggested that directors should act in the interests of a company's creditors if a company becomes distressed.

The United States Court of Appeals for the Third Circuit wasted no time getting the new year off to a roaring start through its ruling in In re LTL Mgmt., LLC, Case No. 22-2003, 2023 WL 1098189 (3d Cir. Jan. 30, 2023). In LTL, the Third Circuit affirmatively dismissed the so-called “Texas Two-Step” by which a solvent corporation had tried to cabin potentially billions of dollars of mass tort liability through an internal corporate restructuring.

In that ruling, the Third Circuit determined that:

When a Cayman Islands company is in official liquidation, no proceedings or claims can be commenced against the company without the Cayman Court's permission. This requirement serves as a safeguard for the liquidation estate of the company in liquidation from being unnecessarily depleted at the expense of stakeholders of the liquidation.

In In re Nine West LBO Securities Litigation (Case No. 20-2941) (S.D.N.Y. Dec. 4, 2020), a federal district court denied in part a motion to dismiss claims brought by the Nine West liquidating trustee against former directors (the "Defendants") of The Jones Group, Inc. (the "Company"), Nine West's predecessor, for, among other things, (i) breaches of their fiduciary duties of care and loyalty, and (ii) aiding and abetting breaches of fiduciary duties. The litigation arises from the 2014 LBO of the Company by a private equity sponsor ("Buyer").

Elon Musk recently said he has a "super bad feeling" about the economy, pithily declaring what most financial commentators have been predicting in more technical terms.

In the recent decision of Paragon Offshore, No. 16-10386 (CSS), 2021 (Bankr. D. Del. June 28, 2021), the U.S. Bankruptcy Court for the District of Delaware (the court) addressed the issue of whether the Office of the United States Trustee (OUST) could collect its quarterly fees against assets that were previously transferred to a litigation trust (the litigation trust) free and clear of any and all claims, liens and other encumbrances pursuant to a confirmed plan of liquidation.

Dans le cadre de l’affaire Bloom Lake relative à la Loi sur les arrangements avec les créanciers des compagnies (la « Lacc »), la Cour supérieure du Québec prononce un jugement au sujet de l'élargissement des pouvoirs du contrôleur dans un contexte où un créancier refusait de produire la documentation demandée par les débitrices.

Of general interest is the appeal in the case of Horton v Henry, on which we reported in our January 2015 update. In Horton, the High Court declined to follow a previous ruling, and decided that a bankrupt could not be compelled to access his pension savings to pay off creditors.