- Jurisdiction and unfair prejudice open to review on appeal

First instance decision

Landlords on 10th May lost their legal challenge at first instance against fashion retailer New Look’s use of a company voluntary arrangement (CVA) it put in place to help it restructure its business.

The landlords argued several points of challenge in their original application, most importantly from a legal and commercial perspective that CVA jurisdiction does not extend to complex, differential arrangements.

In the recent opinion In re PT Bakrie Telecom TBK, 2021 WL 1439953, the Bankruptcy Court for the Southern District of New York provided some further guidance on what constitutes a “collective proceeding” for purposes of achieving recognition of a foreign proceeding under Chapter 15 of the Bankruptcy Code. This post will address the collective nature of the proceeding at issue. In a future post we will address other important elements of Judge Lane’s decision.

On April 29, 2021, the United States Court of Appeals for the Fourth Circuit issued its decision in Siegel v. Fitzgerald (In re Circuit City Stores, Inc.), Case No. 19-2240 (4th Cir. Apr. 29, 2021), upholding the constitutionality of a 2017 law that substantially increased the quarterly fees debtors are required to pay to the Office of the United States Trustee (the “US Trustee”) in chapter 11 bankruptcy cases.

A new framework will be introduced for the cooperation between the courts of Hong Kong and Mainland China on cross-border corporate insolvency.

The Secretary for Justice, Ms Teresa Cheng SC, and Vice-president of the Supreme People’s Court (SPC), Mr Yang Wanming, signed a Record of Meeting in Shenzhen on 14 May 2021 to signify the consensus on the mutual recognition of and assistance to insolvency proceedings between the two places.

Pilot measure on mutual recognition and assistance

Overview

On 12 May 2021, the High Court sanctioned three inter-conditional restructuring plans, under the Part 26A of the Companies Act 2006, for certain English subsidiaries of the Virgin Active group, despite major opposition of certain landlords.[1] In the landmark decision, the High Court exercised its discretion to cram-down multiple classes of dissenting landlords in each plan, compromising their claims.

Last week was a busy week for the courts: we reported on the landlord-led challenges to the New Look CVA and the Virgin Active restructuring plan. Neither judgment made happy reading for landlords, with all challenges dismissed in New Look and the restructuring plan sanctioned despite their objections in Virgin Active. The story has slightly improved for landlords today with the court revoking the Regis CVA. There are important findings from Regis, but in itself the judgment will not be sufficient to turn the tide.

The legal challenge (Carraway Guildford (Nominee A) Limited and Others v Regis UK Limited and Others, No. 8276 of 2018) by landlords against a retail company voluntary arrangement (CVA) was accepted by Mr Justice Zacaroli.

In the recent case of TMG Brokers Ltd (In Liquidation) (also known as: Baker v Staines) the High Court held a director of a company to be jointly and severally liable for payments made by his co-director out of the company’s bank account which were made without proper authority and amounted to disguised distributions of capital. The fact that he had placed trust in the other director for the company's financial affairs did not excuse him from performing his duties.

Background

In what is likely to be the most significant change to the UK restructuring and insolvency market since the Enterprise Act 2002, the Court has paved the way for restructuring plans (RPs) under Part 26A to the Companies Act 2006 to be used to compromise the rights of landlords, financial creditors and other unsecured creditors provided the company shows that those creditors are “out of the money”.

Despite ruling in favour of the peak indebtedness rule’s existence only 12 months prior, on Monday, the Federal Court reversed its decision in Badenoch Integrated Logging Pty Ltd to revoke the rule’s operation in Australia.

Background

The liquidators of Gunns, a major forestry enterprise, commenced proceedings for an unfair preference claim under section 588FA of the Corporations Act 2001 (Cth) against Badenoch Integrated Logging Pty Ltd, a haulage and timber harvesting contractor.