District Court Opinion Puts the Brakes on Involuntary Bankruptcy Petitions

Pedal of the carFiling an involuntary bankruptcy petition is fraught with risk.  If the court dismisses the involuntary petition, the creditors who filed the petition (referred to as the petitioning creditors) may be liable for damages caused by the filing and even punitive damages.  A recent opinion from the District Court for the District of Nevada in State of Montana Department of Revenue v. Blixseth increases the risk for petitioning creditors and may have the effect of decreasing the number of involuntary filings.

In Blixseth, four creditors filed an involuntary Chapter 7 petition against Timothy Blixseth.  Three of the creditors were the taxing authorities for the states of Montana, Idaho and California, and the fourth creditor was the liquidating trustee of the Yellowstone Club Liquidating Trust.  Blixseth, as the alleged debtor, moved to dismiss the involuntary petition, arguing that the involuntary petition did not meet the Bankruptcy Code’s requirement that at least three qualified creditors join in the petition. Continue Reading

Carillion’s Insolvency – How to Protect Yourself

Construction SiteFollowing our post on the failure of Carillion yesterday, Ray O’Connor of our Construction team has written the following article “Carillion’s Insolvency – How to Protect Yourself” which looks at practical ways forward for any sub-contractor, employer/developer or funder involved in a project with Carillion. In the event any advice is required on any issues arising, please contact your local Squire Patton Boggs R&I partner as follows:

Birmingham – Devinder Singh or Russell Hill.
London – Cathryn Williams or Paul Muscutt.
Leeds – John Alderton or Laura Crawford.
Manchester – Susan Kelly.

The deconstruction of Carillion

Construction SiteOn 15 January 2018, Carillion, the UK’s second-largest builder and one of the Government’s largest contractors, was placed into compulsory liquidation and the Official Receiver was appointed as liquidator, with Michael John Andrew Jervis, David James Kelly, David Christian Chubb, Peter Dickens, David Matthew Hammond and Russell Downs of PwC being appointed as special managers to assist in the wind down of the business and realisation of its assets. The company has stated that the Government will be providing the funding required by the liquidator to enable the public services carried out by Carillion staff, subcontractors and suppliers to be maintained for the time being. The situation however remains fluid and further information will be released by the liquidator as to how things will be dealt with as matters progress. Details of the Carillion companies placed into liquidation are included in the website set up by PwC, the Special Managers appointed by the Official Receiver to assist in the liquidation.

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Stricter and personal liability for executives under Slovak insolvency law

Slovakia LawAs of 1 January 2018, those who are obliged to file a petition for declaration of bankruptcy of a company will face stricter liability in Slovakia. This could result in them being required to pay a fine/damages and can even result in their disqualification from sitting on boards of Slovak companies.

In addition to an obligation to pay a contractual penalty in the amount of 12,500 EUR, an executive or board member who fails to file a bankruptcy petition will be liable for damages incurred by creditors as a result of breach of such filing obligation. Executives and directors are the most frequent “persons obliged to file for bankruptcy” but note that the obligation extends to a liquidator and a legal representative of an individual debtor.

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Contracts via email – potential pitfalls

Laptop with Envelope HandshakeA recent decision of the High Court (Goel and another v Grant and another [2017] EWHC 2688 (Ch)) has provided a useful reminder that care must be taken when administrators enter into pre-contract negotiations and the risk of inadvertently entering into a binding contract before terms are finalised. It also deals with the risks of disposing of assets, even those that are difficult to value, without due process. Continue Reading

The Business of Cannabis – Getting into the Weeds

In a prior post, we examined whether state-licensed marijuana businesses, and those doing business with marijuana businesses, can seek relief under the Bankruptcy Code.  As we noted, the Office of the United States Trustee (the “UST”) has taken the position, most recently in Congressional testimony given in June 2017, that a marijuana business cannot seek bankruptcy relief because the business itself violates the Controlled Substances Act 21, U.S.C. §§ 801, et seq. (the “CSA”), notwithstanding their state licenses. The UST has also taken the position that those leasing commercial space to a state-licensed marijuana business are themselves precluded from accessing bankruptcy courts because the CSA makes no distinction between a seller or grower of marijuana and those renting space to the seller or grower.  Continue Reading

Happy new year – or economic meltdown?

Economic MeltdownAt the turn of the new year, economists provide their financial predictions akin to the great Nostradamus. They predict a bleak outlook for the UK economy in 2018, but such forecasts are not always accurate.

The continuing uncertainty of the Brexit negotiations is likely greatly to affect the prospects of any improvement in the UK economy in 2018. Respondents to the Financial Times annual survey of economists (“FT Survey”) also cited as concerns for the UK economy high levels of debt amongst consumers and fears of a downturn in UK trade productivity in comparison to the upturn in the rest of the world.

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Happy Holidays!

iStock_000076433773_SmalleSquire Global Crossings will be on holiday until the New Year.  We look forward in 2018 to continuing to bring our readers observations and insights on significant restructuring and insolvency issues, cases and developments from the United States, the United Kingdom, Europe, Australia and around the world.  We wish everyone a happy holiday and a great New Year!

The woes of Toys R Us – will the “magical place” have its Christmas dreams come true?

“There’s a magical place, we’re on our way there, with toys in their millions, all under one roof – it’s called… Toys R Us!”

The lyrics resonate with millions worldwide. The advert is as iconic as Coca Cola’s “Holidays Are Coming” commercial or the Sainsbury’s “Christmas is for sharing” World War 1 cinematic ad. Sadly, there is no longer a magical place aura emanating from the retail giant, but a sobering reality that its financial disarray may lead to the company’s demise. Continue Reading

Marijuana Businesses Barred from the Bankruptcy Courts: But How Far Will the Bar Extend?

As more and more states pass laws allowing the sale of marijuana, whether for medicinal or recreational purposes, investors will try to claim their share of what is certainly going to be a lucrative market. However, even in a growing market, private enterprises fail or need restructuring. This raises the question of whether distressed marijuana businesses, and those doing business with marijuana businesses, can seek relief under the Bankruptcy Code.

Since the George W. Bush Administration, the Office of the United States Trustee (the “UST”) has taken the position that marijuana businesses cannot seek bankruptcy relief. This position was reaffirmed in Congressional testimony given in June 2017 by Clifford White, the Director of the Executive Office for U.S. Trustees, and more recently in an article written by Mr. White and John Sheahan, a trial attorney for the UST, which was published in the December 2017 edition of the American Bankruptcy Institute Journal. Continue Reading

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