As part of an intended comprehensive amendment of German insolvency law, the German Federal Ministry of Justice has prepared a draft of a new law to facilitate the reorganization of enterprises (“Reorganization Facilitation Act”). The new law will curtail the rights of shareholders of insolvent companies and allow capital measures and other corporate measures to be taken in the insolvency of a company without the participation of the shareholders. The new regulation is of interest to investors because it will significantly simplify the purchase of the shares of an insolvent company.

As attention shifts from the global financial crisis of 2008–2009 to the global sovereign crisis that currently is affecting much of Europe, lawmakers are scrambling to create new laws and regulations designed to stave off the next financial crisis.[1] Meanwhile, a different threat quietly has been growing in America's states, cities, towns, municipalities, and other political subdivisions.

"Safe harbors" in the Bankruptcy Code designed to insulate nondebtor parties to financial contracts from the consequences that normally ensue when a counterparty files for bankruptcy have been the focus of a considerable amount of scrutiny as part of evolving developments in the Great Recession. One of the most recent developments concerning this issue in the courts was the subject of a ruling handed down by the New York bankruptcy court presiding over the Lehman Brothers chapter 11 cases. In In re Lehman Bros. Holdings, Inc., Judge James M.

It is not surprising that within an economic outlook which seems permanently set to "gloomy" many companies are having to think about reorganising their operations or restructuring their holding structures This article highlights some of the tax and other considerations which must be borne in mind when considering such reorganisations or restructurings with reference to some recent (and less recent) cases and changes in the law and points which have come to the fore in the current climate.

Recapitalisations

One of the many issues which arose from the collapse of Lehman Brothers was whether “flip provisions”, which reverse a swap counterparty’s priority in the order of payment on insolvency, were invalid on the basis that they contravened the anti-deprivation principle.  This is a long-established common law principle which seeks to prevent an insolvent party from arranging its affairs to frustrate the legitimate claims of creditors.

Introduction

The Insolvency Act 2003 of the British Virgin Islands (the “IA”) provides that the netting of financial contracts is legally enforceable notwithstanding any provisions of the IA or the Insolvency Rules. Significantly, this means that where an insolvent entity that is party to a financial contract goes into liquidation, what might otherwise be a voidable transaction will be upheld if carried out pursuant to a netting agreement.

On 25 January 2010, the United States Bankruptcy Court handed down its much anticipated decision in relation to an action brought in that court by two Lehman Brothers entities (the Lehman entities) against BNY Corporate Trustee Services Limited (BNY) (the US Decision).

Justice Jacobson's unwillingness to depart from the interests of the majority in relation to Nine Entertainment should give parties confidence that Schemes remain an effective way to effect debt for equity swaps or similar transactions.

The UK Supreme Court, which is the UK's highest court, has handed down its long-awaited decision in Belmont Park Investments Pty Limited v BNY Corporate Trustee Services Limited and Lehman Brothers Special Financing Inc [2011] UKSC 38, in which the Court considered the validity and enforceability of so-called "flip" clauses under English bankruptcy law.