The Supreme Court has ruled that some family trust structures will be ineffective in protecting assets from claims by former partners and, potentially, other creditors.
The decision in Clayton v Clayton has implications for everyone who establishes trusts to manage relationship property, estate planning and insolvency risk.
The facts
The Supreme Court, in a judgment released last Friday,1 has overruled the Court of Appeal by deciding that the IRD stands behind liquidators and employees when cash is available in liquidation and PAYE is owed.
This decision, which upholds the payment waterfall in Schedule 7 of the Companies Act, will be welcomed by insolvency practitioners after the Court of Appeal had upset previous industry practice.
Context
The Supreme Court has affirmed the Court of Appeal’s finding in August of this year that a voluntary administrator may only use a casting vote at a watershed meeting where the number of creditors voting for and against a proposed deed of company arrangement (DOCA) is equal.
Poland’s Supreme Court in a recent ruling found a grant of security for parallel debt to be invalid.
On 9 October 2009, a three-judge panel of the Supreme Court issued a judgment (file no. IV CSK 145/09), in which it ruled that the Polish legal system provides for the possibility to secure claims under a parallel debt (created under foreign law).
Facts of the case
Introduction
On July 13 2016, the US Supreme Court issued its ruling in Puerto Rico v Franklin California Tax-Free Trust. Affirming the decision of the court of appeals, the Supreme Court ruled by a vote of five to two that the US Bankruptcy Code pre-empts the Recovery Act, which Puerto Rico enacted in 2014 to address its mounting debt crisis.
Puerto Rico’s financial woes have recently been front and center in financial news. Although a recent decision by the U.S. Supreme Court curtailed Puerto Rico’s ability to enact its own legislation to address its debt situation, late last month President Obama signed into law legislation designed to allow Puerto Rico to restructure its vast public debt, giving new hope to the Commonwealth’s financially strapped public utilities.
On June 13, 2016, the U.S. Supreme Court upheld lower court rulings declaring unconstitutional a 2014 Puerto Rico law, portions of which mirrored chapter 9 of the Bankruptcy Code, that would have allowed the commonwealth’s public instrumentalities to restructure a significant portion of Puerto Rico’s bond debt (widely reported to be as much as $72 billion). In Commonwealth v. Franklin Cal. Tax-Free Tr., 2016 BL 187308 (U.S.
In the first decision, on June 9, 2016, the United States Supreme Court affirmed the judgment of the Supreme Court of Puerto Rico that Puerto Rico and the United States are not separate sovereigns for purposes of the Double Jeopardy Clause contained in the Fifth Amendment of the U.S. Constitution in the appeal styled under the caption Commonwealth of Puerto Rico v. Sanchez Valle, No. 15-108. Opinion.
Puerto Rico is in the midst of a financial crisis. Over the past few years, its public debt skyrocketed while its government revenue sharply declined. In order to address its economic problems and to avoid mass public-worker layoffs and cuts in public services, the unincorporated U.S. territory issued billions of dollars in face value of municipal bonds. These bonds were readily saleable to investors in the United States due to their tax-exempt status and comparatively high yields.