In Uralkali v Rowley and another [2020] EWHC 3442 (Ch) – a UK High Court case relating to the administration of a Formula 1 racing team – an unsuccessful bidder for the company's business and assets sued the administrators, arguing that the bid process had been negligently misrepresented and conducted.
The court found that the administrators did not owe a duty of care to the disappointed bidder. It rejected the claimant's criticisms of the company’s sale process and determined that the administrators had conducted it "fairly and properly" and were not, in fact, negligent.
The city impounded the debtor’s vehicle for nonpayment of traffic fines. The debtor filed a chapter 13 petition and demanded turnover of the car. Section 362(a)(3) stays any act to “exercise control over property of the estate.” Section 542(a) requires one in possession of property of the estate to deliver it to the trustee. The most natural reading of section 362(a)(3) is that it prohibits affirmative acts that alter the status quo and does not impose an affirmative obligation on a party holding property of the estate to turn it over. Section 542(a) performs that function.
January 2021
BUSINESS REORGANIZATION & RESTRUCTURING YEAR IN REVIEW
In this publication, we take a look back at some notable restructuring transactions of 2020 and identify key legal issues and trends that will be relevant in 2021 and beyond.
Contents
3 UNITED KINGDOM
Recapitalisation of the Lecta Group
5 UNITED STATES
Debt Restructuring of Ligado Networks
7 UNITED STATES
Pre-Packaged Restructuring of Northwest Hardwoods Inc.
8 FRANCE
Air France-KLM Group's 7 Billion Aid
10 ITALY
In Hung Yip (HK) Engineering Company Limited v. Kinli Civil Engineering Limited [2021] HKCFI 153, the Honourable Mr Justice Harris reiterated the test governing when the court will restrain the presentation of a winding-up petition. This is a timely reminder amidst the COVID-19 crisis, which has sparked disputes between companies and their creditors.
On December 27, 2020, the Consolidated Appropriation Act of 2021 (the “CAA”) was enacted to provide additional coronavirus stimulus and relief for businesses challenged by the ongoing COVID-19 Pandemic. In doing so, the CAA includes several targeted, but temporary, changes to the Bankruptcy Code (the “Code”) designed to provide certain debtors with greater flexibility with respect to their leases (which may negatively affect landlords) while ensuring that creditors are not penalized under the preference law for renegotiating their lease terms (which should benefit landlords).
The Supreme Court has lowered (but not eliminated) the risk that a creditor violates the automatic stay by retaining a debtor’s property post-petition. On January 14, 2021, the Supreme Court ruled 8-0 (Justice Barrett abstaining) that the “mere retention” of a debtor’s property does not violate section 362(a)(3) of the Bankruptcy Code. Chicago v. Fulton, 2021 WL 125106 (Jan. 14, 2021).
The bankruptcy trustee of a bank holding company was not entitled to a consolidated corporate tax refund when a bank subsidiary had incurred losses generating the refund, held the U.S. Court of Appeals for the Tenth Circuit on May 26, 2020. Rodriguez v. FDIC (In re United Western Bancorp, Inc.), 2020 WL 2702425(10th Cir May 26, 2020). On remand from the U.S. Supreme Court, the Tenth Circuit, as directed, applied "Colorado law to resolve" the question of "who owns the federal tax refund." Id., at 2.
On January 14, 2021, the Supreme Court unanimously held in City of Chicago v. Fulton that a creditor’s passive retention of a debtor’s property does not violate section 362(a)(3) of the Bankruptcy Code. The Court’s 8-0 decision (Justice Barrett did not participate in the consideration or decision of the case) may have the unintended effect of increasing bankruptcy costs and making it more difficult for individual debtors to achieve a “fresh start”.
Recognition of UK insolvencies in Europe after Brexit[1] is navigating uncertain waters. Following the completion of Brexit, the UK has left parts of the EU's private international law realm, including the application of Regulation (EC) 1346/2000 on Insolvency proceedings (the EU Insolvency Regulation). Therefore, since January this year, any reciprocal statutory cooperation in insolvency law matters between the UK and the EU has ceased.
It was only a matter of time. On January 12, 2021, the Department of Justice (“DOJ”) announced that it had reached its first civil settlement regarding allegations of fraud related to the Paycheck Protection Program (“PPP”).1 DOJ settled a $4.2 million claim against a bankrupt internet retailer and its president for $100,000. Although unique to the case’s specific allegations, the settlement reveals activities that may be alleged as PPP fraud, statutes at DOJ’s disposal to pursue civil enforcement, and terms by which DOJ will resolve PPP fraud allegations.