The Pension Schemes Bill [HL] 2019-20 (Bill) was re-introduced before Parliament on 7 January 2020. Among its proposed amendments to the Pensions Act 2004 (Act) are new criminal offences for failing to comply with a contribution notice, avoiding employer debt, conduct risking accrued scheme benefits, an expansion of the moral hazard powers and an extension of the ‘notifiable events’ framework. The Government’s stated intention is to “ensure that those who put pension schemes in jeopardy feel the full force of the law“. Unfortunately, scope of the amendments is such that if enacted without amendment, they are very likely to deter responsible directors from attempting to restructure financially distressed employers facing significant exposure to defined benefit pension scheme liabilities. Continue Reading Rocking the boat – Pension Schemes Bill proposals may risk destabilising future restructurings
Just in time for Chinese New Year, a Hong Kong court has taken a major step forward in the developing law on cross-border insolvency by recognising a mainland Chinese liquidation for the first time. In Joint and Several Liquidators of CEFC Shanghai International Group Ltd  HKCFI 167, Mr Justice Harris granted recognition and assistance to mainland administrators in Hong Kong so they could perform their functions and protect assets held in Hong Kong from enforcement.
He also declined to follow English precedent dating back more than a century by granting a stay on creditor proceedings in Hong Kong, reasoning that it was in line with modern thinking and practice in cross-border insolvency that a debtor’s assets should be distributed as part of a single proceeding, as per the pari passu principle. Continue Reading A welcome red packet – Hong Kong court recognises mainland Chinese administrators for first time
Germany has notoriously broad voidability laws. As a rule of thumb, any payment by a third party has high voidability risks if the third party has no obligation to make the payment under the contract. Such payments qualify as incongruent (3 months hardening period, very few further requirements) and often qualify as gratuitous (4 years hardening period, without any further requirements). A recent decision of the German High Court has stirred hope that the Court may give some leeway to cash pool payments by group companies. However, on a closer look at the decision, it becomes clear that the boundaries for an exemption from voidability were set very narrowly.
Comment on the German High Court decision dated 12. September 2019 (file no.: IX ZR 16/18) by Christine Borries, LL.M. (Sydney) and Dr. Markus Huber, lawyers of the German Hogan Lovells insolvency and restructuring practice. Continue Reading German insolvency law: Group payments (sometimes maybe) not per se voidable?
With thanks to Anton Korobeynikov of Sayenko Kharenko for his contribution to this article
On 25 September 2019, the Ukrainian Parliament brought into force law No. 112-IX (the “Law“). The purpose of the Law is to correct deficiencies in existing legislation and further promote out-of-court financial restructurings in the jurisdiction. The adoption of the Law comes in light of the high volume of non-performing loans which still exist in Ukraine. Continue Reading A further step taken by Ukraine to simplify out of court loan workouts
In a recent decision, the Ontario Superior Court of Justice recognised the English law schemes of arrangement of the Syncreon group under the Companies’ Creditors Arrangement Act, RSC 1985, c C-36 (“CCAA“). This was the first time a Canadian court was asked to determine whether proceedings under Part 26 of the Companies Act 2006 (the “Companies Act“) could be recognised as “foreign proceedings” under Part IV of the CCAA. The schemes, which included third party releases in favour of the Canadian operating entity of the Syncreon group, were given full force and effect in Canada. Continue Reading First English Scheme of Arrangement Recognised in Canada under the CCAA
The Hong Kong Court of Appeal has suggested that a previous Court decision may have overstepped the mark by suggesting that an arbitration clause in a client agreement should generally take precedence over a creditor’s right to present a winding-up petition.
In But Ka Chon v Interactive Brokers LLC  HKCA 873 (an otherwise fairly routine financial product misrepresentation case), Vice President of the Court of Appeal Madam Justice Kwan made obiter comments implying that the test previously set out by Harris J last year in Lasmos Limited v Southwest Pacific Bauxite (HK) Limited  HKCFI 426, which followed recent English authority, appeared to be at odds with classical Hong Kong and Commonwealth authority whereby a winding-up petition may only be dismissed by establishing a bona fide defence on substantial grounds to the claim for the underlying debt. Continue Reading Back to basics – Hong Kong Court of Appeal queries approach to winding-up petitions where arbitration is involved
American pet owners are probably all familiar with Chewy, an e-commerce pet food and products supplier that will quickly ship those heavy bags of dog or cat food right to your doorstep at competitive prices. No longer did one of the authors of this article have to walk 30 minutes round trip in the dog days of humid DC summers to pick up and carry a 30 pound bag of Taste of the Wild grain-free high prairie recipe to feed an English bulldog and a French bulldog. Leveraged finance attorneys, investors, lenders and borrowers should also be familiar with Chewy, though for reasons that highlight the complexities and risks associated with today’s leverage finance market. Continue Reading Chewing Through Baskets: The “Chewy Phantom Guarantee” and a Cautionary Tale of the Release of a Valuable Guarantee and Collateral Package
On 19 September 2019, Norris J handed down judgment in the challenge brought by six landlords against the Debenhams Retail Limited (Debenhams) company voluntary arrangement (CVA) which was approved by 94.71% of Debenham’s unsecured creditors on 9 May 2019. The challenge been watched with significant interest, particularly by the landlord community, which has for some time expressed increasing concerns regarding the use of CVAs as a mechanism to commute leasehold liabilities while other unsecured creditors’ rights remain unaffected. While CVAs have been the subject of legal challenges previously, the Debenhams challenge is the first time certain key elements of CVAs in play in the market have been tested before the court. Norris J’s decision provide welcome clarification on a number of key issues concerning the treatment of leases in retail CVAs.
The development of new powertrain technology; challenges within established markets, such as diesel emissions issues; and falls in automotive production – production in the United Kingdom has fallen during the last 12 consecutive months – have all had a significant impact on the automotive and mobility industry. The rapid increases in demand for connected, electric, and hybrid vehicles – together with the associated infrastructure – means that effective cooperation among OEMs, suppliers, regulators, and other stakeholders is now more important than ever. The cost of this new technology, aligned with shocks to production, such as the ongoing uncertainties around Brexit and China trade tariffs, means that more than ever, fortune will favor the innovative and the well prepared innovator.
Hogan Lovells partners Joe Bannister (UK), Heiko Tschauner (Germany), and Chris Donoho (U.S.) are part of the firm’s Business Restructuring and Insolvency practice. Bannister and his colleagues have a wealth of experience acting for original equipment manufacturers (OEMs) and suppliers in some of the most complex and intractable automotive cases of the past decade. In this article they discuss the challenging issues that arise when an OEM is faced with a distressed supplier, and what can be done to mitigate the resultant risks.
Global law firm Hogan Lovells is pleased to announce the Honorable Kevin J. Carey will be joining the firm’s Business Restructuring and Insolvency Practice as a partner effective October 1. Judge Carey joins the firm following his retirement on August 31 from the United States Bankruptcy Court, District of Delaware, where he earned a reputation for being one of the nation’s top bankruptcy judges.“ Judge Carey’s superlative reputation is well earned—in his 18+ years on the bench, he presided over some of the largest and most significant Chapter 11 cases,” said Chris Donoho, Global Head of the Business Restructuring and Insolvency Practice. “He is a great resource for companies and creditors, and we expect that he will play key roles—as examiner or fiduciary—in bankruptcy cases and restructurings across the U.S. and internationally. He also has the cross-border experience needed to be a facilitator in multinational proceedings.”