The English High Court has, in one of the few successful cases on wrongful trading, clarified when directors ought to know that there is no reasonable prospect of avoiding insolvent liquidation and where the burden of proof lies in such cases.

Background

Summary

On 12 May 2015, the English High Court provided guidance on the interpretation of the Loss provision under the 1992 ISDA Master Agreement in its judgment in Fondazione Enasarco v Lehman Brothers Finance S.A. and another [2014] EWHC 34 (Ch). The judgment will be of interest to participants in the derivatives markets as it provides:

Despite the fact that there have been no football club insolvencies in over two seasons, on 5 June 2015 the Football League voted to amend its rules on football insolvencies. The amendments to the existing rules were approved at the recent Football League Conference and will come into force from the start of the 2015-16 football season. They provide a range of changes to take a harder line on clubs (or their parent companies) that enter administration and to improve returns to creditors, both football and non-football related.

A recent English High Court decision has held that prospective Administrators do not need to look behind the directors’ motives in appointing them; they need to look ahead as to what might happen in the administration and consider whether the statutory purpose of the administration can be achieved.

Compensation to be paid to a bankruptcy estate professional is many times subject to intense dispute. In the case of a bankruptcy trustee, section 326 of the Bankruptcy Code provides for a tiered system of compensation based upon the amount of money distributed by the trustee to parties in interest. However, as demonstrated by the recent decision in In re Virgin Offshore U.S.A., Inc., 2015 Bankr. LEXIS 233 (Bankr. E.D. La. Jan.

Determining whether a contract is executory and, thereby, subject to assumption or rejection under Section 365(a) of the Bankruptcy Code, can be a difficult and fact intensive inquiry. The Eighth Circuit Court of Appeals recently held, in an en banc decision, that continuing obligations under a trademark licensing agreement were insufficient to render the agreement executory.

A previous post introduced the general concept of ROT provisions as a means to protect suppliers as creditors in the insolvency of their customers. The basic principle of ROT under German law is that the supplier remains the owner of the goods which it has supplied to its customer until the customer has fully paid the purchase price for the goods.

In ordinary civil litigation, appellate review is generally limited to “final judgments,” in order to prevent the wastefulness of appeals on rulings that are not truly dispositive of the case. That notion becomes somewhat more difficult in a bankruptcy, where there are often multiple litigations within the umbrella bankruptcy case. But does that mean that notions of finality should be different in the bankruptcy context? Not so, at least according to the Sixth Circuit.

Most lawyers are generally familiar with the concept of a floating lien under the Uniform Commercial Code. A secured creditor takes a lien in a collateral category that changes from time to time as items are added or subtracted. A common example is a working capital loan, in which financed inventory is produced and sold, then becoming an account, which is collected to provide the funds to produce new inventory.  A secured creditor may perfect a lien in the changing mass of inventory and receivables, as each category exists from time to time.

This week will hopefully see the end of a long running battle between Britain’s biggest landlords and the restructuring profession. On 12 February, the Court of Appeal will start to hear an appeal relating to the administration of Game Station (Jervis v Pillar Denton). It will consider whether the administrators should pay rent for the properties which they occupied during the administration as an administration expense, so ensuring the landlords receive their rent in priority to payments  made to other creditors.

Background