|| Issue No. 9|
at a Glance...|
Europe, Africa and
Vexed issues can arise in the context of determining appropriate voting classes and addressing the impact of divergent interests within voting classes. Our highlight article this month reviews the approach taken in respect of those issues in a recent decision of the New Zealand Supreme Court, involving a creditors' compromise under Part 14 of the Companies Act. At the same time in the United Kingdom, the High Court also considered class composition and 'special interest' matters in sanctioning the Lehman Brothers International (Europe) administrators' scheme of arrangement.
In the Asia-Pacific region, we focus on developments in Singapore, with consideration of the criteria for the availability of DIP financing in restructuring proceedings and an analysis of a High Court decision confirming the power of the Court to grant a Mareva injunction in support of foreign court proceedings. We also have a report from Australia on the regulations setting out the exceptions and excluded arrangements to the recently enacted stay on enforcement of ipso facto provisions in corporate insolvencies.
The newsletter also features a review of the FirstEnergy Solutions case from the United States, which examined questions of jurisdiction to determine the rejection of regulated power purchase agreements, and a note on the rejection by the Canadian Court of a discretionary deemed proxy voting arrangement in respect of a CCAA plan.
Finally, we turn to the adoption in Europe of new Annexes to the Recast Insolvency Regulation, together with recently announced corporate insolvency reforms in the United Kingdom. Those reforms are expected to include new restructuring tools in the form of formal restructuring plans (modelled on the scheme of arrangement) and a restructuring moratorium, as well as a ban on the enforceability of ipso facto termination clauses.
As always, we hope that you enjoy the range of articles assembled this month.
Scott Abel, Fellow, INSOL International New Zealand
Partner, Buddle Findlay
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Classes of Creditors: the New Zealand Supreme Court's View
In Trends Publishing International Ltd v Advicewise People Ltd & Ors  NZSC 62, New Zealand's Supreme Court addressed the controversial question of class composition in relation to creditors' compromises under Part 14 of the Companies Act 1993. Some ten days later, the same question was addressed by the English High Court in Re Lehman Brothers International (Europe)  EWHC 1980 (Ch), in the context of a scheme of arrangement (as reported on further below). The two courts came to very different conclusions.
In the New Zealand Supreme Court, the majority confirmed the High Court and Court of Appeals' earlier judgments. In those judgments, the lower courts had unanimously concluded that classes in Part 14 compromises were defined by reference to wider economic interests in the compromise. That was, on its face, a departure from the English and Australian courts' longstanding approach to the definition of classes of creditors. This article briefly explains why and considers whether New Zealand has really departed from the English and Australian consensus view about class construction.
By Oliver Gascoigne, Senior Associate
Sebastian Bisley, Partner
Buddle Findlay, New Zealand
To read the full article please click here
For the case decision please click here
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Discretionary Deemed Proxy Ruled Fundamentally Undemocratic for Voting Creditor Claims
Arrangement Relatif à Bloom Lake 2018 QCCS 1657
Bloom Lake General Partner Limited, Wabush Resources Inc. and related entities (Bloom Lake) received Court protection under the Companies’ Creditors Arrangement Act in 2015. In 2018, a proposed settlement was reached of preference claims that would result in between $62 and $100 million available for distribution to third party unsecured creditors.
Employees and retirees held a significant claim of approximately $103.8 million for post-employment benefits and the main issue in this decision was how the 2,400 employees and retirees would vote their claims. The non-unionized employees and retirees were represented by several appointed employees (Representative Employees) and the unionized employees and retirees were represented by their Union. Bloom Lake proposed that each individual would vote their own claim, but the Representative Employees and the Union sought a discretionary deemed proxy which would apply unless the employee or retiree opted out of it.
For a case note by Baker Mckenzie, 15 August 2018 please click here
For the case decision please click here
FirstEnergy: Bankruptcy Court Asserts Primacy Over FERC; Approves Rejection of Power Purchase Agreements
In re FirstEnergy Solutions Corp., et al., v. Federal Energy Regulatory Commision, Et Al. Case No. 18-50757
The U.S. Bankruptcy Court for the Northern District of Ohio asserted its primacy over the Federal Energy Regulatory Commission (FERC) in deciding whether to allow FirstEnergy to repudiate certain FERC-regulated power purchase agreements (PPAs). In a decision with significant implications for all participants in rapidly evolving wholesale power markets, the bankruptcy court applied the highly deferential business judgment standard instead of the more stringent standard applied by FERC when evaluating proposed changes to PPAs featuring mutually agreed-upon filed rates. The court’s decision is now the subject of a direct appeal to the U.S. Court of Appeals for the Sixth Circuit, and the outcome may inspire additional action by Congress and the President.
For a case note by K&L Gates, 4 September 2018 please click here
For the 18 May 2018 case decision please click here
The Ever-Shrinking Chapter 11 Case
This article reviews a recent report by Fitch Ratings, one of the “big three” credit rating agencies entitled the “Shrinking Length of U.S. Bankruptcies.” The report provides many useful statistics and analyses of recent and historical trends in Chapter 11 cases. According to Fitch, the median duration from the date of filing of a Chapter 11 petition to the date of confirmation of a plan of reorganisation or liquidation has been declining significantly – with four months being the median duration for the 30 US cases studied with plans confirmed in 2017 and five months for the 34 cases studied with plans confirmed in 2016. In contrast, the median duration for the 304 cases which Fitch studied where plans were confirmed between 2003 and early 2018 was seven months.
For the full article please see Squire Patton Boggs, eSquire Global Crossings Blog, 20 August 2018
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A Singapore Court Confirms Power and Jurisdiction to Grant Mareva Injunction in Aid of Foreign Court Proceedings
China Medical Technologies, Inc. (in liquidation) & CMED Technologies Ltd vs Wu Xiaodong & Bi Xiaoqiong (in her personal capacity and as trustee of the Xiao Qiong Bi Trust and the Alisa Wu Irrevocable Trust)
The primary argument before the Singapore Court in this case was whether the Singapore Court has the power to grant a Mareva injunction in aid of Hong Kong proceedings pursuant to section 4(10) of the Civil Law Act of Singapore (Cap 43, 1999 Rev Ed).
This judgment clarifies previous divergent decisions, and confirms that the Singapore Court does have power to grant a Mareva injunction in aid of foreign proceedings provided that:
- the cause of action is justiciable in a Singapore Court;
- the Singapore Court has in personam jurisdiction over the defendant;
- the defendant has assets in Singapore;
- substantive proceedings have been brought in Singapore, but may be stayed pending determination of the foreign court proceedings; and
- the foreign court’s judgment is capable of enforcement in Singapore.
For a case note by Cosimo Borrelli and Simon Ma of Borrelli Walsh, 3 September 2018 please click here
For the case decision please click here
A Stay or No Stay, that is the Question
In Australia on 1 July 2018, the stay on ipso facto clauses introduced by the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (Act) came into effect and applies to contracts entered into on or after that date. The Act, left a number of issues up in the air which were expected to be filled by regulations. This article summarises the provisions of the Corporations Amendment (Stay on Enforcing Certain Rights) Regulations 2018 which set out a lengthy list of contracts to which the stay will not apply and the Corporations (Stay on Enforcing Certain Rights) Declaration 2018 which contains a list of contractual rights which will not be affected by the stay, both of which were released in late June 2018.
For the full article by Ian Dorey and James Thompson, K&L Gates, 11 September 2018 please click here
Debtor in Possession Financing in Asia - Considerations for Financial Institutions
As Singapore continues efforts to position itself as a restructuring hub in Asia, its adoption of debtor-in possession financing, commonly known as DIP financing, is likely to generate increased interest. The Singapore regime is predominantly modelled on relevant provisions from the US Bankruptcy Code and incorporates concepts of DIP financing that are a hallmark of Chapter 11 reorganisations. This article provides a brief overview of the US legislation compared with the regime in Singapore and the first judgment that discussed the legislation (Re Attilan Group Ltd  SGHC 283) issued on 8 November 2017. It also considers the strategies that financial institutions will want to consider to protect and / or enhance their positions as appropriate when DIP financing looms over their debtors.
For the full article please see Mayer Brown, Legal Update Asia, 29 August 2018
The Lehman Brothers Administration: Scheme to the Rescue
Re Lehman Brothers International (Europe)  EWHC 1980 (Ch)
The administration of Lehman Brothers principal European trading arm, Lehman Brothers International Europe (LBIE) has, after the repayment of all creditors, produced an unprecedented surplus of £6.6 billion, plus an estimated £1.1 – 1.7 billion of anticipated future recoveries. This surplus was effectively unavailable for distribution on account of creditors’ interest claims until all inter-creditor disputes relating to priority and entitlement to the funds had been resolved. LBIE’s administrators therefore proposed a scheme of arrangement as the only realistic way to enable the distribution of the surplus without years of further litigation This article examines the areas of challenge to the scheme that the administrators faced and Hildyard J’s comprehensive landmark judgment which offers helpful insight into several areas of scheme jurisprudence, particularly in respect of class composition.
For a case note please see White & Case Client Alert, Banking / Financial Restructuring and Insolvency, August 2018
For the case decision please click here
Adoption of new Annexes A and B to the Recast Insolvency Regulation
Substantial reforms to Regulation (EC) 1346/2000 on insolvency proceedings were made under Regulation (EU) 2015/848 of 20 May 2015 on insolvency proceedings (recast) (the “Recast Insolvency Regulation“). The Recast Insolvency Regulation applies to insolvency proceedings commenced on or after 26 June 2017. Following changes to the insolvency laws in a number of Member States, the European Commission has adopted new Annexes A and B, which contain the details of the insolvency proceedings and insolvency practitioners falling within the scope of the Recast Insolvency Regulation.
For the full article please see Hogan Lovells 5 Minute Workout Blog, 24 August 2018 For the Regulation please click here
Government Announces Potentially Seismic Changes to Restructuring Regime
On 26 August 2018, the UK government announced that it intends to introduce new legislation to implement certain changes to the UK restructuring and insolvency systems as soon as parliamentary time permits. The proposed reforms are in response to recent Government consultations and follow on from the two high profile corporate failures of Carillion and BHS. The measures include a new restructuring tool modelled broadly on the current scheme of arrangement (which will bring with it decades of jurisprudence and thereby introduce some element of familiarity and certainty into what is otherwise a brand-new tool) but with important changes. This is the most ground-breaking of measures and would introduce a seismic change to the insolvency and restructuring toolbox.
For the full article please see Freshfields Bruckhaus Deringer LLP Client Alert, 31 August 2018
For the Insolvency and Corporate Governance - Government Response please click here
This article first appeared in Volume 15, Issue 5 of International Corporate Rescue and is being reproduced with permission of Chase Cambria Publishing
2 - 4 April 2019
Save the date for the INSOL International Asia Pacific Annual Regional Conference taking place in Singapore at the Sands Expo and Convention Centre, Marina Bay Sands. This will be a superb opportunity to meet colleagues from around the world in the vibrant city of Singapore. The Main Organising Committee and the Technical Committee have already commenced work to develop a cutting edge and forward looking technical programme.
Registration will open September 2018.
We would like to thank our sponsors for their generous support of INSOL Singapore. For further information on sponsorship please contact Tina McGorman firstname.lastname@example.org
Main sponsors: Borrelli Walsh | Lipman Karas | Norton Rose Fulbright | RSM
Welcome Cocktail Reception: BDO
Farewell Cocktail Reception: AlixPartners
Corporate Sponsors: Harneys | Vendorable
Wednesday Networking Coffee Break: Archer & Greiner P.C.
Wednesday Welcome Breakfast: South Square
Thursday Welcome Breakfast: Brown Rudnick
Thursday Networking Coffee Break: Rajah & Tann LLP
Thursday Lunch: Burford Capital
INSOL Singapore - Offshore Ancillary Meeting
2 April 2019
Following on from our successful one day offshore ancillary meeting held in New York this year, we will be holding an offshore ancillary meeting next year again prior to INSOL Singapore, save the date!
The main organising committee are working on the technical programme for the day.
INSOL International would like to thank our offshore sponsors:
Main sponsor: Carey Olsen
Coffee break sponsor: KRyS Global
Lunch break sponsor: Walkers
For further information and details of sponsorship opportunities please contact Sarah Smith, INSOL International at email@example.com
INSOL International Dubai One Day Seminar
Wednesday 3 October 2018
The Ritz Carlton, Dubai International Financial Centre
INSOL International in association with the Dubai Department of Economic Development are holding a one-day seminar in Dubai this year.
Registration deadline is Tuesday 18 September, don’t forget to secure your place before then.
To register click here
We are delighted to announce our speakers who bring an international and local flavour of knowledge and experience to our seminar. For further details on the programme and speakers please visit our website
Thank you to our following sponsors:
Gold sponsors: DLA Piper | Grant Thornton
A number of sponsorship opportunities are still available. For further information please contact Sarah Smith, INSOL International at firstname.lastname@example.org
Africa Round Table Open Forum
Friday 26 October 2018 Polana Serena Hotel, Maputo, Mozambique
INSOL International and World Bank Group jointly host the annual Africa Round Table, now in its eighth year!
The first day is a closed meeting by invitation only. The second day, ART Open Forum, is open to anyone interested or affected by insolvency reform in Africa and across the globe.
The theme for 2018 Africa Round Table Open Forum is “Multinational insolvencies in an African context”.
For full details of
the programme please see our website
We would like to thank the following sponsors for their generous support of Africa Round Table:
Platinum sponsors: DLA Piper | PwC
Gold sponsors: Bowmans | ENSAfrica Dinner sponsor: Grant Thornton
For further information and details of sponsorship opportunities available, please contact Penny Robertson, INSOL International at email@example.com
INSOL International Hong Kong One Day Seminar
Wednesday 7 November 2018
Four Seasons Hotel, Hong Kong
INSOL International is running its first seminar in Hong Kong on Wednesday 7th November 2018.
Registrations are now open
We would like to thank the following sponsors for their generous support of the INSOL Hong Kong One Day Seminar:
Platinum Sponsors: Carey Olsen | Conyers Dill & Pearman | Lipman Karas | Tanner De Witt
Cocktail Reception Sponsor: Harneys
For further information and details of sponsorship opportunities please contact Susannah Drummond Moray, INSOL International at firstname.lastname@example.org
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