DAC Beachcroft's GC Horizon Scanner is a selection of legal and regulatory developments that we consider are the most interesting and relevant to General Counsel, senior managers and professionals, allowing them to keep abreast of issues which are likely to impact their business, prepare for opportunities and mitigate risks.
A new era of corporate compliance in a time of financial crisis |
Corporate ventures are usually founded with the very best intentions, but as matters unfold disputes between investors are all too common.
The legal steps to resolve such disputes and assert control over a company can be complex and arduous.
However, there are good reasons for this due process, and it cannot be circumvented.
On June 22, U.S. Circuit Judge Judge Jerry Smith issued a short, three-page opinion in the case Hidalgo County Emergency Service Foundation v. Carranza that appeared, at first blush, to be a death blow to many debtors' ability to obtain Paycheck Protection Program, or PPP, loans under the Coronavirus Aid, Relief and Economic Security, or CARES, Act.
In Marex Financial Ltd v Sevilleja [2020] UKSC 31, the UK Supreme Court has opened the way for a judgment creditor to sue a controller of companies who denuded the companies and placed them in liquidation to defeat the creditor's enforcement of a US$5 million judgment. The Court of Appeal had ruled that the creditor was caught by the so-called "reflective principle" that prevents shareholders recovering losses suffered in common with the company. Singapore, Hong Kong, Australia and other common law jurisdictions are almost certain to follow suit.
This briefing first appeared in the June 2020 edition of South Square Digest.
Executive Summary
In February 2020 the British Virgin Islands Commercial Court (the "BVI Court") sanctioned a creditor scheme of arrangement, which was part of a much larger cross boarder restructuring. This scheme of arrangement, which as a creditor scheme was itself rare for the BVI, was preceded by the BVI's first ever "soft touch" provisional liquidation (in linked proceedings), which commenced in December 2018.
Keine Anwendung der Business Judgement Rule bei unternehmerischen Entscheidungen eines Insolvenzverwalters, BGH, Urteil v. 12.03.2020 – IX ZR 125/17
A recent case has highlighted the dangers of the treatment of a Director’s Loan Account (“DLA”), and the risks to directors of trying to re-categorise their DLAs as salary payments. This can mean that the information previously provided to HMRC was incorrect and puts directors at risk of penalties and possibly even a charge of tax evasion.
Conversion of Director’s Loan Accounts to Dividends
The US Court of Appeals for the Tenth Circuit has ruled that proceeds from property that was fraudulently transferred cannot be recovered under Section 550 of the Bankruptcy Code.[1] This decision limits a subsequent recipient’s exposure where the initial transferee of the property had altered the form of the property that was initially received prior to transferring it to that subsequent recipient.
In a judgment delivered by the First Hall (Commercial Section) on 13 July 2020 in the case Avinco Group Holdings N.V vs Eolia Limited, the Court was asked to determine inter alia whether a winding up application based on the alleged insolvency of the respondent could be entertained in circumstances where the underlying claim of the claimant was disputed.