Know the rules! Further changes to IR 2016 afoot

UK insolvency law has seen a number of significant changes over recent years, including the introduction of the Insolvency Rules 2016 (“IR 2016”) in April 2017. Further legislation has been expected in order to ensure that all of these changes apply consistently throughout the whole insolvency regime, after it became clear that IR 2016 did not apply to insolvent LLPs.

The latest changes come in the form of secondary legislation coming into force on 8 December 2017, being the snappily titled Insolvency (Miscellaneous Amendments) Regulations 2017 (the “Miscellaneous Amendments 2017”) and the Insolvency (England and Wales) and Insolvency (Scotland) (Miscellaneous and Consequential Amendments) Rules 2017 (the “Miscellaneous and Consequential Amendments 2017”). It is hoped that the Miscellaneous Amendments 2017 and the Miscellaneous and Consequential Amendments 2017 will unify the insolvency regime and tie up the loose ends resulting from the introduction of IR 2016, as highlighted in our previous blog Unfinished Business – Insolvency Rules 2016 and changes still to come. Continue Reading

SunEdison Court Strikes Down Third-Party Releases On Multiple Grounds

A recent decision by Bankruptcy Judge Stuart Bernstein, made in connection with plan confirmation in the SunEdison bankruptcy case, strikes down non-consensual third-party releases on a variety of bases. The decision analyzes issues regarding subject matter jurisdiction, the circumstances of deemed consent, and the applicable substantive requirements for a non-consensual release.

In their plan of reorganization, SunEdison and various affiliates included a broad release of a variety of third‑party claims. The releases extended to claims against (i) the debtors’ officers, directors, employees, financial advisors, attorneys and professionals, (ii) the DIP lenders, (iii) many of the debtors’ prepetition lenders, and (iv) each of those parties’ affiliates, advisors, principals, members, and professionals. The release purported to cover not only creditors voting in favor of the plan, but also those who were silent and neither objected nor voted.  Continue Reading

English Scheme of Arrangement approved for Luxembourg-registered company

The English High Court has sanctioned a scheme of arrangement for Algeco Scotsman PIK SA, a Luxembourg-incorporated company, after the creditors consented to the New York governing law and jurisdiction clause being altered in favour of the jurisdiction of the English courts. The issues discussed were:

  1. the fair representation of a class of creditors;
  2. cross-jurisdictional schemes; and
  3. early tender fees offered to creditors.

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The Bankruptcy Rule Changes are Almost Here – and You Should Care

You have been reading for months that the U.S. Supreme Court approved amendments to the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) that go into effect on December 1, 2017.  You also may have ignored these changes because they affect Chapter 13 consumer cases and may not impact your commercial bankruptcy practice.


Wrong.  Don’t ignore these imminent changes to the Bankruptcy Rules.  Yes, the headline-grabbers have been about Chapter 13 cases, including the adoption of a national model plan (amended Rules 3015 and 3015.1) and modified deadlines for noticing the objection deadline and hearing date for Chapter 13 plans (Rules 2002(a) and (b)).[1]  But, important changes affect Chapter 7 and 11 cases too, particularly regarding secured creditors’ proofs of claim.  The bottom line is that commercial practitioners should understand some of these changes.  Continue Reading

A Fight Over the Runway – Monarch Administrators Lose High Court Battle

Aeroplane LandingAn out-of-hours office appointment of an administrator, although not unusual, is not a regular occurrence in the world of insolvency. It is however, exactly what happened at 4am on Monday 2 October, as Britain’s longest surviving airline brand ‘Monarch’ entered administration. The collapse of the airline comes as a result of mounting cost pressures in an increasingly competitive market and is the third European airline insolvency in 2017, following Air Berlin and Alitalia.

An out-of-hours appointment of an administrator is available to a Qualifying Floating Charge Holder (“QFCH”) where there is a pressing need for an appointment to take effect outside Court hours. Despite the fact it was known that Monarch’s administration was imminent in the days leading up to 2 October, the appointment was effected in the early hours of the morning as this was the only time of the day where all Monarch flights were on the ground. The delay also provided time for the Civil Aviation Authority (“CAA”) to plan the operation to repatriate the estimated 110,000 stranded customers.

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Steering to Safe Harbour – Changes to Australian Insolvency Laws Herald a New Era for the Turnaround of Distressed Companies

Australia’s corporate insolvency regime has undergone significant reform with the passing of the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017 (the Bill) through both houses of parliament.

One of the key elements of the reforms is the introduction of a “safe harbour” for company directors, operating as an exception to the civil insolvent trading provisions of section 588G(2) of the Corporations Act 2001 (Cth). The new regime will create a safe harbour for company directors from personal liability for insolvent trading if, once directors start to suspect a company may become or is insolvent, they start developing one or more courses of action that are reasonably likely to lead a better outcome for the company than placing it into liquidation or administration.

It is hoped the new regime will drive a cultural shift amongst boards by encouraging company directors to engage early with possible insolvency by investigating and developing turnaround or restructuring strategies with the benefit of the safe harbour provisions with a view to facilitating a company’s recovery, rather than being placing it prematurely into administration or liquidation. Continue Reading

Taking flight: taxation on receivership

Aircraft MaintenanceThe recent case of Farnborough Airport Properties Company and another v HMRC is noteworthy for the light it shines on the dimly lit and often difficult interaction between tax law and insolvency.

The issues

The two companies operating Farnborough Airport (the host of ‘the largest industry event on the aerospace calendar’) were members of the same ‘group’ of companies as a third company, Piccadilly Hotels 2 Limited (“Piccadilly”).  For tax purposes, all members of a “group” are essentially treated as a single economic unit. Group membership can be useful when, for example, assets need to be moved around the group: company A can transfer an asset to company B on a ‘no gain no loss’ basis – no tax is triggered at the time of the disposal. Similar tax grouping rules exist for stamp duty/stamp duty land and the specialist tax regimes for intangible assets, loan relationships and derivative contracts

In addition, being in the same tax group allows (subject to certain conditions) loss-making company A (let’s call it Piccadilly) to ‘surrender’ its losses to profit-making ‘claimant’ company B (let’s call it Farnborough Airport). This is called ‘group relief’. In this way, the tax liability of the group (treated as an economic whole) broadly reflects its overall profitability (when treated as an economic whole). The losses of Piccadilly become valuable to the wider group. Clearly, when a group is broken so that it ought not to be treated as the same economic unit, group relief should cease to be available.

The problem with loss-making companies is that they may become insolvent. In the case of Piccadilly, a receiver was appointed and the question arose as to how the appointment of a receiver affected the tax grouping? Did it break the economic unit and therefore, the tax group? Conventional wisdom has been that, unlike the appointment of a liquidator, entering receivership does not break the group.

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Secured Lenders Take Note: Second Circuit Rejects Make-Whole Premiums But Opens The Door To Higher Interest Rates

As they say, what one hand giveth, the other hand taketh. In its recent decision in In re MPM Silicones, LLC, the U.S. Court of Appeals for the Second Circuit addressed make-whole premiums and cramdown rates of interest (among other issues not addressed here), issuing rulings that will impact creditors and debtors alike. Not only will the Second Circuit’s decision have an immediate impact on proceedings in bankruptcy courts in the near term, the decision may affect debt issuance in the long term.

Momentive Performance Materials, Inc. (“MPM”), a producer of silicones used to manufacture household and industrial products, filed its chapter 11 bankruptcy petition in April 2014. At filing, MPM’s debt included the 2012 issuances of first lien and 1.5-lien senior secured notes, due in 2020. The indentures underlying these notes each contained a make-whole provision, pursuant to which noteholders (together, the “Senior Lien Noteholders”) would receive a make-whole premium in the event that MPM, at its option, redeemed the senior secured notes before October 15, 2015. The indentures also each included an acceleration clause that provided that if MPM filed a bankruptcy petition, the principal, interest and “premium, if any” would ipso facto become immediately and automatically due and payable, as of the petition date. Continue Reading

LIBOR – living on borrowed time?

London Interbank Offered RateThe FCA Chief Executive Andrew Bailey announced 0n 27 July 2017 that market participants should not rely on the London Interbank Offered Rate (“LIBOR”) being available long term. The announcement made it clear that the long-standing benchmark used both in the UK and the US is to be replaced.

The speech presented by the FCA’s Chief Executive emphasised that:

  • LIBOR is not considered to be sustainable;
  • the market should work to transition to alternative rates by the end of 2021; and
  • firms should not rely on LIBOR being available after the end of 2021.

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Bankruptcy Proceedings in Russia: An Analysis of Insolvency Statistics

Sergey Treschev and Elena Malevich of Squire Patton Boggs’ Moscow office have joined with legal journalists Alina Mikhailova and Maria Fomicheva of to write an article recently published in Insolvency and Restructuring International. They analyze Russian insolvency statistics from 2014 to 2017, drawing out some interesting trends.

The process of publishing and exchanging information about company failures in Russia will be improved and accelerated this year as the state registration authorities will receive electronic documents from the state commercial courts or the Uniform Federal Register of Bankruptcy data. Continue Reading