Clean Air: is your business ready?

There in an increasing focus on emissions and pollution through various regulations and initiatives.

You may have seen coverage of, or taken part in activities for “Clean Air Day” on 20 June 2019, a campaign to grow awareness about air pollution. Clean Air legislation has of course been around for a number of decades, with statutory provision initially aimed at issues like smog, burning of fossil fuels, and dark smoke.

The Government set out its Clean Air Strategy earlier in the year and further legislation is likely to follow. The plans referred to in the 2019 strategy include reducing emissions from vehicles and introducing clean air zones (some of which are already in operation), reducing deposits of reactive forms on nitrogen, reducing ammonia emissions (impacting the farming industry), tighter emissions standards in industry and reducing emissions in the home.

As restructuring and insolvency lawyers, we are only too aware of the impact of a business not planning ahead and focusing on the immediate issues and challenges they face daily.

But as those who are involved in imports and exports have had to plan for Brexit, those businesses who stand to be affected by these changes must plan appropriately too. Many businesses will be affected in some way, if not already, and we touch on some the implications below:

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It Should Be Settled Law – Unsecured Attorney’s Fees Claims Are Permissible

In Travelers Cas. & Sur. Co. of Am. v. PG&E, 549 U.S. 443 (2007), the Supreme Court held that bankruptcy law does not disallow a post-petition unsecured claim for attorney’s fees to the extent such claim is authorized by a pre-petition contract and not otherwise expressly disallowed. That pronouncement should have stopped all future litigation over the issue. That has not been the case.

Recently, the Fourth Circuit confronted this very issue in SummitBridge Nat’l Invs. III, LLC v. Faison, 915 F.3d 288 (2019). The facts of SummitBridge are straightforward. The debtor, Faison, executed three promissory notes to his lender, which notes were secured by deeds of trust on the debtor’s real property. Faison commenced a bankruptcy case and the lender filed proofs of claim. The lender subsequently sold its interest in the promissory notes and claims to SummitBridge National Investments III, LLC. The debtor then proposed a plan which provided that SummitBridge’s claims would be allowed as secured claims in the amount of principal, interest, pre-petition attorney’s fees and a certain portion of the post-petition interest and attorney’s fees. The plan, however, precluded SummitBridge from recovering any post-petition attorney’s fees after it had received the value of the underlying collateral. Regardless, SummitBridge filed and pursued unsecured claims for post-petition attorney’s fees. The debtor’s objection to these claims was sustained by the bankruptcy court. The district court affirmed and SummitBridge appealed to the Fourth Circuit. Continue Reading

The changing landscape of retail CVAs – are landlords taking back control?

There has been an influx of company voluntary arrangements (“CVAs”) in recent times, as retailers fight to rescue their UK high street stores. Retail CVAs accounts for the highest proportion of CVAs at 19%. As more and more CVAs are approved, we consider some of the recent trends seen in the retail sector which showcase the flexibility of a CVA and reflect the demands of landlords whose support is vital to the continuing viability of a business.

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That Didn’t Take Long: Ninth Circuit’s Decision in Garvin v. Cook Invs. NW is Challenged

Marijuana Cannabis Leafs

As noted in prior posts, the Ninth Circuit opened the door, albeit narrowly, to cannabis company bankruptcies when it issued its opinion in Garvin v. Cook Invs. NW on May 2, 2019.  In Garvin, the Ninth Circuit affirmed the confirmation of a plan of reorganization proposed by the lessor to a marijuana growing operation.  The Ninth Court adopted a narrow interpretation of section 1129(a)(3)’s confirmation requirement that a plan be proposed “not by any means forbidden by law”, holding that this requirement applies only to the “means of a reorganization plan’s proposal, not its substantive provisions.”  The Court refused to consider the U.S. Trustee’s argument that the debtors’ plan should be dismissed “for cause” under section 1112(b) since the U.S. Trustee had failed to renew the dismissal motion prior to confirmation.

It did not take long before the Garvin Court was criticized for even partially opening the door to cannabis company bankruptcies.

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Section 363(o) Implications: Bankruptcy Court Denies Debtor’s Request to Disband Consumer Creditors’ Committee

On May 17, 2019, the Bankruptcy Court for the Southern District of New York announced that the Official Committee of Consumer Creditors (the “Consumer Committee”) appointed in the In re Ditech Holding Corp. bankruptcy case would not be disbanded.  Ditech, supported by the ad hoc group of term loan lenders (the “Ad Hoc Group”), had filed a motion requesting that the Consumer Committee be disbanded or alternatively have a limited scope and budget.  After receiving objections from the U.S. Trustee (the “UST”), Consumer Committee, and various consumer borrower groups, the Court refused to disband or otherwise limit the Consumer Committee.  The Court found that consumers constitute the majority of Ditech’s unsecured creditors and that the Official Committee of Unsecured Creditors (“UCC”) could not adequately protect consumer borrower issues arising under section 363(o) of the Bankruptcy Code. Continue Reading

Up in the Air….? Proposed changes to airline travel and insolvencies

Last year we wrote an article Let’s Fly Away’ reporting on the increasing number of airline insolvencies.

The Department for Transport has now published its final report reviewing airline insolvency and in this article, we look at the recommendations of that report.

Changes that we might expect to see in the future include:

-a new flight protection scheme (requiring passengers to pay an additional levy on flight costs);

-reforms to the UK airline insolvency regime; and

-better consumer safeguards.

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When do the Hong Kong Courts have jurisdiction to make a bankruptcy order against a foreign debtor?

Hong Kong is known to be an international business hub, and also serves as a gateway to China’s Belt and Road Initiative, which has over 65 countries participating in developing infrastructure and investment initiatives between East Asia and Europe.

High value transactions are commonplace and one way to protect the interests of Hong Kong businesses transacting with foreign companies is to seek a guarantee from the directors or shareholders of the foreign company.

However, enforcing the guarantee and proceeding to obtain a bankruptcy order against foreign guarantors is often a worry, in particular on the question of whether the Hong Kong Court will have jurisdiction to make a bankruptcy order if the debtor does not reside in Hong Kong.

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The Supreme Court Has Spoken: Victory for Trademark Licensees

Earlier today, the Supreme Court finally answered the question of whether a trademark licensee is protected when the trademark owner/licensor files a bankruptcy petition and rejects the trademark license in accordance with section 365 of the Bankruptcy Code.  To cut to the chase, trademark licensees won.

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Back to the future? The return of Crown preference

The proposal to reinstate Crown preference in insolvency has met resistance from all angles; the insolvency profession, turnaround experts, accountants, lawyers and funders. But despite HMRC’s bold statement in its consultation paper that the re-introduction of Crown preference will have little impact on funders, it is clear following a discussion with lenders that it may well have a far wider impact on existing and new business, business rescue and the economy in general than HMRC believes.

The intention to use Crown preference as a means to recover unpaid taxes for the benefit of the public purse fails on many levels. In fact it is likely to result in a far bigger dent to the Treasury’s pocket through loss of tax elsewhere.

The Government issued a consultation on the proposal in February this year (a copy of which can be accessed here) and comments on the paper are invited by 27 May 2019.

Squire Patton Boggs and R3 hosted a discussion group with representatives from across the restructuring and lending community and other key stakeholder groups. With the Government having largely dismissed the impact of the proposals on lenders, the discussion produced lively and interesting debate. Continue Reading

HMRC, preferential treatment and insolvency – uncertain times for funders

This morning Squire Patton Boggs in conjunction with R3 hosted representatives from across the business community to discuss the proposed return of Crown preference in insolvency.

Following the Government announcing in last Autumn’s Budget that HMRC’s preferential status will be restored in part in April 2020, Squire Patton Boggs together with R3 and representatives from creditor bodies, insolvency and restructuring professionals, banks, the funding community, government, and business representative bodies aired their views about the consultation which concludes at the end of this month.  The overwhelming conclusion was that the proposal creates significant uncertainty for funders impacting on existing lending, new business and the UK economy.

We will publish details highlighting the key areas of concern in the coming days.

For further reading please click here to read our previous blog.