A Fight over the Runway II – Monarch Successful on Appeal

Paper AeroplaneFollowing on from our previous blog A Fight Over the Runway – Monarch Administrators Lose High Court Battle, the latest development in the saga is the recent Court of Appeal decision in Monarch Airlines Ltd v Airport Coordination Ltd [2017] EWCA Civ 1892. Overturning the decision of the High Court, the Court of Appeal held that Monarch was entitled to be allocated take-off and landing slots (the “Slots”) at Luton and Gatwick airports for the summer of 2018. As a result of this, the administrators have been able to press on with the sale of the Slots, to Wizz Air and British Airways respectively, and realise further value for creditors. Continue Reading

“But I Didn’t DO Anything – – Passive Conduct and the Automatic Stay

One of the fundamental elements of the American bankruptcy system is the automatic stay under section 362 of the bankruptcy code. The stay protects the debtor and its assets from creditor activity, in order to facilitate equitable treatment of creditors in the collective bankruptcy process. The remedies provided for violations of the stay allow the estate to enforce the protections provided by section 362.

Two recent cases from the 10th Circuitexamine the degree to which some affirmative conduct on the part of a creditor is required in order to violate the automatic stay. In the first case, WD Equipment v. Cowen (In re Cowen), 849 F.3d 943 (10th Cir. 2017), the debtor sought to recover a truck that had been repossessed by a creditor prior to the debtor’s bankruptcy filing. The creditor refused the debtor’s request to return the truck. Continue Reading

EU Proposals for Harmonisation of Insolvency Practitioners and Judges

Gavel and a Law Book - European UnionMuch has already been written about the proposal for the “Second Chance” directive (“Proposal“) published in November 2016 which is still being debated by the EU bodies – and rightly so. Harmonisation of insolvency law across the EU is needed as one in four insolvency proceedings is a cross-border insolvency and creditors need to know what to expect in other EU countries and that the courts and practitioners cooperate in an efficient way.

But clear and harmonised rules for insolvency procedures are not enough for a successful, rapid and cost-effective restructuring of a company, if an incompetent or unprofessional trustee is handling the procedure and the courts take their time to act. Therefore, the Proposal also focuses on the qualification and training of insolvency professionals and the support for restructuring measures through the courts. This should result in procedures of better quality, more effective supervision, improvement of the residual value for creditors and, importantly, a reduction in the legal uncertainty creditors face, which is said to lead to low recovery rates at present. Continue Reading

There’s Gold in Them Thar Employee Benefit Trusts … Fool’s Gold

Gold ingotsEBTs – The Good

Employee Benefit Trusts (“EBTs”) have become prevalent in recent years. They were originally devised as a form of discretionary trust to benefit employees and in most cases continue to be operated as a legitimate part of employee incentive plans, such as to house shares for distribution to employees.

EBTs – The Bad

However, a second tier of “bad” EBT structures has evolved over time which have become increasingly more elaborate in nature as HMRC have increased their efforts to clamp down on their abuse. In some cases, these schemes have been shown to have no purpose at all other than to avoid the payment of Pay As You Earn tax (“PAYE”) and National Insurance (“NI”) contributions on income to key employees, and in some cases to benefit from Corporation Tax (“CT”) relief. This is clearly an issue for HMRC, but it is increasingly becoming an issue for insolvency practitioners too, not least due to the fact that HMRC as a major creditor in most of these cases will insist that action be taken against the directors by the office holder.  See our blog, Employee Benefit Trusts and insolvency – the next big thing?

If a company enters insolvency having made distributions through an EBT to a key employee whilst creating an unpaid tax liability and not paying other creditors, the insolvency office holder will have to consider carefully whether the director(s) could be liable to a claim for misfeasance or whether the transaction can be challenged as a transaction defrauding creditors under sections 212 and 423 respectively of The Insolvency Act 1986.

Continue Reading

Gawker Media: Hulk Hogan Body Slams Company Into Bankruptcy And Court Pins

The American Bankruptcy Institute Journal just published our article analyzing an important decision issued in the Gawker Media bankruptcy case.  As we discuss, the court’s decision is likely to have a dramatic impact on media-industry debtors because of the court’s refusal to apply the California anti-SLAPP statute to the Debtors’ claim objection.  But the decision is also important because of the court’s narrow interpretation of the “personal-injury tort” exception to core jurisdiction.

Click here to read the article.

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.

Continue Reading

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.

Right?

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

LexBlog