Marijuana Business And Access to Bankruptcy – As Weak Competitors are “Weeded Out”, Is Bankruptcy A Viable Option?

More and more states are legalizing marijuana, whether for medical or recreational purposes. As businesses try to enter this space, competition will “weed out” the weakest competitors.  But are marijuana dispensaries and growers, and those providing ancillary services to them, able to seek relief under the Bankruptcy Code? We, along with our colleagues, John Wyand and Sarah Stec, this week published an article with Practical Law addressing this topic. We hope that you enjoy the article and that it fosters a discussion on whether and how marijuana-related business can utilize the Bankruptcy Code, or similar state law remedies, to either reorganize or to maximize recoveries for creditors.

To read the article, click here.

Spotlight on CVAs – the British Property Federation gives Squire Patton Boggs its views on the recent spate of “landlord” CVAs

Cathryn Williams, Paul Muscutt & Ian Fletcher

Cathryn Williams and Paul Muscutt, partners in the Squire Patton Boggs Restructuring & Insolvency team in London, interview Ian Fletcher, Director of Policy (Real Estate) of the BPF (the trade association for UK residential and commercial real estate companies) to get the BPF’s views on the recent spate of CVAs seeking to reduce/compromise lease liabilities.

Continue Reading

New Guidance Note Anticipated on Collective Redundancies in Insolvency

P45

The Insolvency Service intends to publish a new guidance notice to address the issues faced by employers in dealing with collective consultation when a company is facing insolvency, following consultation with the industry last year.

The guidance note is expected to require insolvency practitioners to notify the government in advance of collective redundancy proposals and to comply with the requirement to consult when seeking to rescue or wind up a business.

The consultation sought (1) to understand the difficulties faced in practice by directors and insolvency practitioners when redundancies are proposed in an insolvency situation and (2) suggestions on how to improve the position.

The new guidance is likely to require directors and insolvency practitioners to commence consultation procedures even if time is limited and full consultation is not possible.

It will be interesting to see if the guidance note truly redresses the tension between the rights of employees on the one hand (who in some cases are entitled to 90 days consultation) with the objectives of insolvency practitioners on the other, to wind up or rescue a business when time is limited – particularly so when many insolvency practitioners already seek to address this issue by instigating collective consult procedures, even if time is short.

At the very least it is hoped that the guidance note will provide some clarity and assurance to insolvency practitioners on best practice without imposing additional requirements which frustrate the objective of corporate rescue.

The Supreme Court Extends Bankruptcy Protections To Even Dishonest Debtors

Can an individual debtor make an oral false statement about an asset to a creditor and get away with it by discharging the creditor’s claim in his or her bankruptcy?  On June 4, 2018, the Supreme Court issued its opinion in Lamar, Archer & Cofrin, LLP v. Appling in which the Court unanimously answered this question in the affirmative.

The facts of the case are relatively straightforward.  The law firm of Lamar, Archer & Cofrin, LLP (the “Firm”) represented R. Scott Appling (“Appling”) in business litigation.  Appling fell behind in payment of his legal bills, and the Firm threatened to withdraw as his counsel and to place a lien on its work product until it was paid.   In response, Appling told the Firm that he was expecting a tax refund of approximately $100,000 that was enough to cover his current and future legal fees.  Based on this statement, the Firm continued to represent Appling in the litigation.  Without the Firm’s knowledge, Appling subsequently requested a tax refund of only $60,718, and ultimately received only $59,581.  Appling never paid the Firm any of these funds, and instead spent the money on his business.  Appling subsequently told the Firm that he had not yet received the refund, and the Firm agreed to finish the litigation and delay collection of the outstanding fees. Continue Reading

Professional firms – in the fee firing line again

In the last week we have seen MPs criticise accountancy firms, KPMG, Deloitte, EY and PWC in their first report on the collapse of Carillion, describing the big four as “a cosy club” and calling for the firms to be forcibly broken up.  Whilst not suggesting that the firms were to blame for the collapse, it is the level of fees reportedly paid to the firms which caught the MPs attention– £72 million in 10 years.

Perhaps the numbers seem worse in light of findings that suppliers to Carillion often had to wait 120 days for payment or were squeezed on fees by having to accept a discount on their invoices in return for an accelerated payment. EY was singled out in particular for providing advice on deferred payment schemes when payment of their own fees were not deferred. Continue Reading

Keeping Special Revenues “Special”

Special revenues may not be as special as many bondholders have historically expected.  Two recent rulings[1] from District Court Judge Laura Taylor Swain in the Puerto Rico PROMESA proceeding have held that bond issuers are not required to make post-petition special revenue bond payments during a pending Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”)[2] Title III bankruptcy proceeding.  Judge Swain also held that unless the Oversight Board authorizes special revenue payments, the court lacks authority to compel the payment.  The rulings are at odds with existing precedent, legislative history, and market expectations and have alarmed the municipal finance industry.

In this blog post, we look at the immediate impact of Judge Swain’s interpretation of the Bankruptcy Code—pending appeal—and consider how to mitigate bondholder risk for new special revenue secured bond issuances.  Continue Reading

Washing Away Actual Fraud? One Court Says You Can.

Can the recipient of an actual fraudulent transfer effectively “cleanse” the transfer if the funds are returned to the debtor?  In a recent opinion, the United States Bankruptcy Court for the Eastern District of Pennsylvania answered that question in the affirmative.

In Holber v. Nikparvar (In re Incare, LLC), the Chapter 7 Trustee (the “Trustee”) sought to avoid approximately $750,000 in alleged actual fraudulent transfers that had been made by the debtor Incare, LLC (“Incare”) to Advanced Urgent Care P.C. (“Advanced”).  Advanced was an emergency medical services provider that was wholly-owned by Incare’s principal, Dr. Mehdi Nikparvar (“Nikparvar”). Continue Reading

Employees – why they may be out of a job and out of pocket on corporate failures

P45It is no great surprise that following the collapse of Carillion and with other retail businesses teetering on the edge, insolvency and corporate recovery is back in the news.

Some of the biggest casualties of entities like Carillion are the employees.  Luckily, in the Carillion failure many jobs have been saved, but there is still a residual cost to employees who have to submit claims to the National Insurance Fund and the liquidator to recover payments for unpaid wages, holiday and sick pay. Continue Reading

Taking advice from professionals is not a “get out of jail free” card for directors in the event of insolvency

TightropeDirectors of a company in financial distress will often turn to their professional advisors to assist in making decisions about the company’s future; whether that be their lawyers, accountants, bank, tax advisors or insolvency professionals.

It is often a period of high pressure, where the right or wrong decision may have far-reaching consequences for an individual director or board later down the line should the company fail.  Thoughts of transactions at undervalue, claims of preference and threats of possible misfeasance proceedings loom in the shadows at this time.  It is therefore no surprise that directors will (and should) seek advice and guidance from professionals in such troubled times.

Continue Reading

Supermarket wars or sweep?

Shopping TrolleyIn a retail world that is ever changing, could the big four supermarket giants become the big three? Sainsbury’s and Yorkshire-based supermarket Asda (the second and third largest supermarkets in the UK) have announced they are at an ‘advanced’ stage in proposed merger talks. The merger could result in approximately 2,800 stores and represent over 30% of the UK grocery market. (Note that these figures are dependent on the Competition and Markets Authority review and so the eventual combined portfolio could be less).

The big supermarket brands have been trading outside the traditional food and drink market for some time, with supermarket giants becoming your ‘one stop shop’ for all things ranging from clothing and electrical goods to home furnishings. The leaders in the market are constantly looking for new sources of growth and ways to adapt to changing consumer demands.

Continue Reading

LexBlog