The arrival of the new year is a pivotal time — a moment to look back and consider the accomplishments and lessons of the past year, and an opportunity to reassess our trajectory as we face the next twelve months, and beyond.  We reset, resolve anew to improve our personal and professional lives. In the rearview mirror, INSOL’s Quadrennial Conference in Sydney marks a high point — and we anticipate gathering for the first time in New York for INSOL 2018 International Americas Conference. During this moment between past and future, now that you’ve decided to exercise more regularly and stay in touch with friends and family — I encourage you to pause and read this month’s insolvency news, including a restructuring review and outlook in which energy and retail still figure prominently.

In the words of Lord Byron, “The best prophet of the future is the past.”  This month we look to precedent to guide our future and find that, among several great articles about recent cases, an instructive theme emerges. Three articles involve the tension between passive silence and candid action before the court and regulators. In the Highlight Article, we examine a notable chapter 15 case from the Bankruptcy Court of the Southern District of New York — a scathing opinion and reminder to be proactive and candid in court. Another great article details the same court requiring active participation in another context, holding that passive consent is insufficient to validate third party releases in a plan of reorganisation. Closing out the theme, this issue considers the tension between silence and ASX continuous disclosure obligations in light of Australia’s newly enacted safe harbour provisions.

A fundamental purpose of law is to memorialise lessons of the past for the collective future good — to avoid repeating injustice. Several of the articles that we bring to you highlight these efforts across the globe as we enter the new year, with developments in insolvency legislation in Germany, Poland, Russia, India and the Cayman Islands in various stages of implementation. In the wake of Hurricane Maria, the British Virgin Islands are rebuilding more than their physical infrastructure with the enactment of a Limited Partnership Act.

Change is constant, whether it be new legislation, new matters — or even a new practice, the retirement of a colleague or your own professional transition. Whatever you face in 2018, here’s wishing you every success in the new year!

David Lawton

Senior Counsel

Bracewell LLP, USA

Silence is not Always Golden: Court wants Candour in Chapter 15 Recognition Proceedings

The Highlight Article this month reviews the recent opinion of the United States Bankruptcy Court for the Southern District of New York in In re Oi Brasil Holdings Coöperatief U.A. (Coöp), No. 16-11791 (SHL), 2017 WL 6021319 (Bankr. S.D.N.Y. Dec. 4, 2017) addressing a motion filed by Coöp’s Dutch insolvency trustee and certain of its creditors, including Aurelius Capital Management, LP (Aurelius). The Dutch insolvency trustee sought to modify or terminate a prior order entered by the court recognising the Brazilian recuperação judicial proceeding of Oi, S.A., a Brazilian telecommunications conglomerate, and certain of its affiliates. Applying 1517(d) of the U.S. Bankruptcy Code, the Court denied the motion on two bases.  First, the Court exercised its discretion under the circumstances as permitted under 1517(d); second, the Court denied the motion because “Aurelius chose to sit on the sidelines during this Court’s Prior Recognition Hearing, while simultaneously planning—and later executing—a strategy to undo that recognition and block the Brazilian RJ Proceeding.” Although the Coöp Opinion is factually narrow, it presents a cautionary tale for all parties in interest who might consider strategically manipulating chapter 15 recognition proceedings to obtain beneficial treatment.

By

David L. Lawton, Senior Counsel

David M. Riley, Associate

Bracewell LLP, USA

To read the full article please click here

For the case decision please click here

Cases

USA

Silence is Not Consent: SunEdison Court Rejects Third Party Releases by Passive Consent

In Re SunEdison, Inc. Case No. 16-10992 (SMB) (Docket No. 4253) (Bankr. S.D.N.Y. Nov. 8, 2017)

Third party releases attract significant attention and debate in Chapter 11 cases. A staple of the largest and most complex cases for years, plan provisions releasing and enjoining claims against non-debtors, particularly officers and directors, are now common place in most business reorganisations. While U.S. case law permits a bankruptcy court to enjoin claims against non-debtors in limited, fact-specific circumstances, plan proponents frequently achieve far broader releases by creditor consent. In this decision, a Bankruptcy Judge for the Southern District of New York has challenged conventional thinking about third party releases in bankruptcy by asking whether a creditor can be deemed to have released non-debtor third parties simply by failing to vote on a chapter 11 plan.

For a case note please see K&L Gates U.S. Restructuring & Insolvency Alert, 30 November 2017

For the case decision please click here

Legislation

British Virgin Islands

BVI Limited Partnership Act

The British Virgin Islands has enacted the eagerly awaited Limited Partnership Act. While the new Act is yet to be officially gazetted and brought into force, it represents a major addition to the commercial laws of the BVI. On its commencement, the new Limited Liability Partnership Act will replace the existing limited partnership provisions found at Part VI of the Partnership Act, 1996 for new BVI limited partnerships and those existing ones that choose to re-register under the new Act. As yet the date on which the new Act will be brought into full force and commenced is not known, but it is expected that this will be early in 2018.

For the full article please see Ogier Publication, 19 December 2017

Cayman Islands

Amended and Consolidated Cayman Islands Insolvency and Restructuring Rules

Consolidated and amended insolvency and restructuring rules and regulations come into

force in the Cayman Islands on 1 February 2018 (the Amended Rules). The Amended Rules do not represent a comprehensive overhaul of the rules and regulations but they do make a number of significant changes to the procedural aspects of Cayman Islands’ domestic and cross-border insolvency and restructuring legislation. This article contains an outline of these changes which largely reflect and codify existing practice.

For the full article please see Maples and Calder Update, 21 December 2017

Articles

Cayman Islands

Offshore Restructuring Review and Outlook

This article looks back at the work which has driven the offshore restructuring world in the past year including energy restructuring and retail.  It also considers the restructuring trends that may be seen in the next twelve months in light of factors including: (i) a rising interest rate environment in the US; (ii) continued coordinated OPEC / non-OPEC action; and (iii) ongoing disruption in traditional bricks and mortar retail.  

For the full article please see Appleby News Alert, January 2018

Cases

Australia

Entering the Song: Queensland Supreme Court Rules on Insolvency Practitioner Remuneration and Expenses Approval

Park & Muller (liquidators of LM Investment Management Ltd) v Whyte No 2 [2017] QSC 229

Park & Muller (liquidators of LM Investment Management Ltd) v Whyte No 3 [2017] QSC 230

LM Investment Management Ltd (In Liquidation) (Receivers and Managers Appointed) (LMIM) was the responsible entity for 6 managed investment schemes. The applicants in this case were appointed administrators of LMIM in 2013, and subsequently became its liquidators in early August 2013. Later in August 2013, the Court appointed a receiver to the assets of one of the schemes for the purposes of winding it up.  The liquidators applied for approval of part of their remuneration, and for orders to permit them to pay remuneration and expenses out of the assets held on trust for the managed investment schemes. The receiver challenged the adequacy of the affidavit material of the liquidators to show the work performed was reasonable, and the necessity of the tasks undertaken. This case note examines the key takeaways for insolvency practitioners from this decision.

For a case note please see Baker McKenzie Client Alert, 4 December 2017

For Whyte No 2 [2017] QSC 229 please click here

For Whyte No 3 [2017] QSC 230 please click here

Legislation

Australia

Navigating the Safe Harbour – To Disclose or not to Disclose?

This Alert focuses on the Australian Safe Harbour reforms and the implications in relation to the continuous disclosure obligations of a public company.  The explanatory memorandum accompanying the Safe Harbours laws made it clear that a public company's continuous disclosure obligations are not affected and continue to apply. To date, the Australian Securities Exchange (ASX) has not released any guidance on the interaction between the Safe Harbour laws and the continuous disclosure obligations. It is understood that potential guidelines may be released by the ASX in 2018. Ahead of the release of these formal guidelines, this article examines how a public company should approach its disclosure obligations when seeking to invoke the protection of the new Safe Harbour regime.

For the full article please see K&L Gates Australia Restructuring and Insolvency Alert, 22 December 2017

Articles

India

Judicial Interpretation of the Insolvency and Bankruptcy Code, 2016: Role of the Competition Commission of India

The Insolvency and Bankruptcy Code, 2016 (IBC) was enacted by the government of India with a view to promoting entrepreneurship, the availability of credit, and to ensure expeditious insolvency resolution in a time-bound manner, in order to balance the interests of all the stakeholders.  There are strict rules relating to the completion of the corporate insolvency resolution process introduced under the IBC.  In this regard, one of the key areas of legal compliance may be the prior notification and approval requirements under Section 6 of Competition Act, 2002. Section 6 of this Act requires

all combinations (mergers, acquisitions or amalgamations) that satisfy certain financial thresholds and are not otherwise exempt, to be notified to and approved by the Competition Commission of India before coming into effect. This article examines the potential conflict between the simultaneous timelines under the Act and the IBC process and possible ways to address this.

For the full article please see AZB & Partners Inter alia - Competition Law, December 2017 

Cases

UK

Too Big to Fail: Insolvency of Former State Entities in the Balkan Region

Re Agrokor DD [2017] EWHC 2791 (Ch) (9 November 2017)

Agrokor DD, was a food and beverage company established in Croatia (the country’s largest privately-owned company whose revenues were a significant proportion of the GDP) with chains of companies in Hungary, Slovenia and Serbia. On 10 April 2017, the Commercial Court of Zagreb opened an “extraordinary administration procedure” in respect of the company and 50 affiliated companies. The administrator in this case sought recognition of the extraordinary administration proceedings so as to obtain relief in the form of, inter alia, a moratorium on creditors acting in respect of assets located in the United Kingdom. This decision illustrates the complexities of analysing the nature of a foreign law for the purposes of a recognition application under the UNCITRAL Model Law on Cross-Border Insolvency Proceedings 1997, as applied in the United Kingdom by the Cross-Border Insolvency Regulations 2006, in order to determine whether it falls properly under the scope of the international instrument so as to enable recognition and subsequently deploy any remedies appropriate to the case.

For a case note by Paul Omar, Senior Lecturer, De Montfort Law School, 3 December 2017 please click here

For the case decision please click here

Legislation

Germany and Russia

International Legislative Update 

Germany - Major German insolvency law reforms designed to facilitate corporate group insolvencies will become effective on April 21, 2018. When the reforms come into force, they will supplement and complement the Recast European Union Insolvency Regulation that became effective on June 26, 2017. The new German legislation will permit corporate group insolvencies with individual proceedings, on an entity-by-entity basis, presided over by a single German insolvency court and administered by a single insolvency administrator, unless a unitary approach is impracticable.

Russia - Significant changes to Russian insolvency law became effective on July 30, 2017. Among other things, new Federal Law No. 266-FZ (July 29, 2017) supersedes provisions concerning the vicarious liability of "controlling persons" for a bankrupt corporate debtor’s obligations set forth in RF Law No. 127-FZ on Insolvency (October 26, 2002). Under the amendments, controlling persons may be held vicariously liable if: (i) creditor claims cannot be satisfied as a consequence of a controlling person’s actions or inactions; (ii) their actions or omissions resulted in serious harm to the debtor’s financial condition; (iii) they failed to timely file a bankruptcy application on the debtor’s behalf; or (iv) they violated the insolvency law by, among other things, causing the debtor to file for bankruptcy when it was still able to pay its obligations in full.

For the full article please see Jones Day EuroResource - Deals and Debt, December 2017

blications and News

INSOL International Small Practice Technical Paper Series - December 2017

Collection of Practical Issues Important to Small Practitioners - People's Republic of China

This country study on the People's Republic of China was written by Xiuchao Yin, Senior Partner of Dentons LLP, Beijing.

INSOL International sincerely thanks Xiuchao Yin for providing INSOL members with this very informative paper.

To view the full paper please click here

Collection of Practical Issues Important to Small Practitioners - Jersey

This country study on Jersey was written by Alan Roberts, Director, Grant Thornton and Marcus Pallot, Partner, Carey Olsen, Jersey.

INSOL International sincerely thanks Alan Roberts and Marcus Pallot for providing INSOL members with this very informative paper.

To view the full paper please click here

INSOL International Technical Paper Series – December 2017

Court Restructuring and Bankruptcy in Poland

This paper provides members with an overview of the Polish court restructuring and bankruptcy laws and the concept of a licensed and regulated restructuring and insolvency practitioners’ profession in Poland. The paper also examines the issues of court restructuring and bankruptcy in Poland in the cross-border context.

INSOL International sincerely thanks Karol Czepukojc for this excellent and informative technical paper.

To view the full paper please click here

Adequate Protection for Secured Creditors in the Context of the Proposed EC Directive on Preventative Restructuring

On 22 November 2016, the European Commission published a proposal for a directive “on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures”. This paper focuses on certain aspects of the provisions in the proposal dealing with preventive restructuring frameworks, more particularly the stay of enforcement proceedings by secured creditors against assets of the debtor and the protection that secured creditors may be entitled to in respect of such a stay. This paper looks at the provisions in chapter 11 of the US Bankruptcy Code dealing with “adequate protection” for secured creditors, as well as recent amendments to the Singapore Companies Act and assesses whether the European legislator should consider introducing the concept of “adequate protection” in the proposal.

INSOL International sincerely thanks Krijn Hoogenboezem, Fellow, INSOL International, Dentons Boekel N.V., Netherlands for this detailed analysis and for writing this excellent technical paper.

To view the full paper please click here

If you would like to send an article for inclusion in one of our forthcoming issues please contact our Technical Officer, Louise Jennings at louise@insol.ision.co.uk

If you would like to introduce a new member to INSOL International please contact our Database Manager, Tony Ashton, at tony@insol.ision.co.uk

American Bankruptcy Institute  
Asociación Argentina de Estudios Sobre la Insolvencia  
Asociacion Uruguaya de Asesores en Insolvencia y Reestructuraciones Empresariales  
Association of Business Recovery Professionals - R3  
Association of Restructuring and Insolvency Experts  
Australian Restructuring, Insolvency and Turnaround Association  
Bankruptcy Law and Restructuring Research Centre, China University of Politics and Law 
Business Recovery and Insolvency Practitioners Association of Nigeria  
Business Recovery and Insolvency Practitioners Association of Sri Lanka  
Canadian Association of Insolvency and Restructuring Professionals  
Canadian Bar Association (Bankruptcy and Insolvency Section)  
Commercial Law League of America (Bankruptcy and Insolvency Section)  
Especialistas de Concursos Mercantiles de Mexico  
Finnish Insolvency Law Association  
Ghana Association of Restructuring and Insolvency Advisors  
Hong Kong Institute of Certified Public Accountants (Restructuring and Insolvency Faculty)  
INSOL Europe  
INSOL India  
INSOLAD - Vereniging Insolventierecht Advocaten 
Insolvency Practitioners Association of Malaysia  
Insolvency Practitioners Association of Singapore  
Instituto Brasileiro de Estudos de Recuperação de Empresas  
Instituto Brasileiro de Gestão e Turnaround  
Instituto Iberoamericano de Derecho Concursal  
International Association of Insurance Receivers  
International Women’s Insolvency and Restructuring Confederation  
Japanese Federation of Insolvency Professionals 
Korean Restructuring and Insolvency Practitioners Association   
Law Council of Australia (Business Law Section)  
Malaysian Institute of Certified Public Accountants  
National Association of Federal Equity Receivers  
Nepalese Insolvency Practitioners Association  
NIVD – Neue Insolvenzverwaltervereinigung Deutschlands e.V.  
  Recovery and Insolvency Specialists Association (BVI) Ltd  
 Recovery and Insolvency Specialists Association (Cayman) Ltd 
Restructuring and Insolvency Specialists Association of Bermuda 
REFOR–CGE, Register of Insolvency Practitioners within "Consejo General de Economistas, CGE"  
Restructuring Insolvency & Turnaround Association of New Zealand  
Russian Union of Self-Regulated Organizations of Arbitration Managers  
Society of Insolvency Practitioners of India  
South African Restructuring and Insolvency Practitioners Association   
Turnaround Management Association do Brasil
Turnaround Management Association (INSOL Special Interest Group)