On June 21, 2022, Congress and the President (i) extend the $7.5 million debt limit for Subchapter V eligibility, and (ii) adjust other Subchapter V rules.[Fn. 1]
One of the adjustments is this:
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”).
In Short
The Situation: Bankruptcy courts have split on what rate of post-petition interest unimpaired creditors of a solvent debtor are entitled to receive. Bankruptcy courts have variously ruled that such creditors were entitled to the contractual rate of interest, interest at the federal judgment rate (about the rate on a one-year Treasury bill) as of the bankruptcy petition date, or an equitable rate. Another possibility is that no interest is payable at all.
“Without these [mediated] settlements, there is no Plan.”
- From Opinion on Plan confirmation, In re Boy Scouts of America, Case No. 20-10343, Delaware Bankruptcy Court, Doc. 10136, at 80 (issued July 29, 2022).
The Boy Scouts of America bankruptcy has achieved a milestone: on July 29, 2022, the Bankruptcy Court issues a 281-page Opinion on confirmation of Debtor’s Plan of Reorganization. The Opinion is generally favorable toward Plan confirmation but identifies a number of issues remaining to be resolved.
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.
The Hon’ble Supreme Court vide its order dated May 18, 2022 in Indian Overseas Bank Versus M/S Rcm Infrastructure Ltd. And Another[1] observed that the proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) cannot be continued once the Corporate Insolvency Resolution Process (CIRP) has been initiated and moratorium is ordered under the Insolvency and Bankruptcy Code, 2016.
Bankruptcy law has its own set of rules. When a company files for Chapter 11 reorganization under the Bankruptcy Code, the filing triggers an automatic stay that prohibits any attempts by creditors to exercise control over any property of the bankruptcy estate; the bankruptcy court then has jurisdiction over all property of the estate, which includes all property “wherever located and by whomever held.” See 11 U.S.C. §541(a); 28 U.S.C. §1334(e)(1).
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’.