Recently, lawyers for 50 Cent fought against the appointment of a bankruptcy examiner to investigate Instagram photos the rapper posted of himself lying next to piles of hundred dollar bills. In one picture, the bills spelled out the word “BROKE.” The humor of the photos was lost on the Office of the U.S. Trustee, who viewed the postings as disrespectful of the bankruptcy process and possible evidence that 50 Cent committed bankruptcy fraud by concealing assets from his creditors.
Coal is down. That’s not news to anyone who pays the even the slightest attention to the industry. Peabody Energy Corp., the largest U.S. coal mining company, just filed for Chapter 11 bankruptcy protection, following the path taken by Arch Coal, Inc., Alpha Natural Resources, Inc., Patriot Coal Corp.
New York Washington, D.C. Los Angeles Palo Alto London Paris Frankfurt Tokyo Hong Kong Beijing Melbourne Sydney www.sullcrom.com April 14, 2016 Related-Party Debt / Equity Regulations IRS Issues Proposed Regulations Intended to Limit Earnings Stripping but Which—if Finalized—Would Broadly Change the U.S. Tax Treatment of Related-Party Indebtedness SUMMARY On April 4, 2016, the IRS and Treasury Department issued proposed regulations (the “Proposed Regulations”) that would—if finalized in their current form—treat related-party debt as equity for U.S. tax purposes in certain circumstances.
My spouse and I visited Chicago years ago, and confusedly started driving the wrong way down a one-way street. We were promptly pulled over by one of the Windy City’s finest. I gave him my best smile, and said, “Sorry, officer, we’re from out of town.” He grunted, “Don’t they have one-way streets where you come from?” But he didn’t give us a ticket. A recent disciplinary opinion out of Oklahoma, involving a tech-challenged bankruptcy lawyer, brings the story to mind.
E-filing woes bring bankruptcy court discipline
A recent decision by the U.S. Court of Appeals for the Second Circuit, In re Tribune Company Fraudulent Conveyance Litigation,1 represents a significant victory for shareholders who may get cashed out in connection with a leveraged transaction that precedes a company bankruptcy.
Caesars Entertainment Operating Company Inc. and various related entities (“Caesars”) filed Chapter 11 bankruptcy cases in Chicago in 2015. The jointly administered cases have been highly contentious, involving high dollar disputes among Caesars and several committees appointed in the Chapter 11 cases. An Examiner was appointed to investigate possible claims related to a series of transactions by Caesars prior to the bankruptcy. All of the key parties in the Caesars cases are represented by large national and/or international law firms.
Yesterday, Energy XXI Ltd. became the latest domestic oil and gas company to pursue a more deleveraged balance sheet via Chapter 11 restructuring. This does not come as a surprise to those following the company – for much of the last three months Energy XXI’s stock has been trading at less than $1.00 per share. According to the press release issued by the company, the filing comes after the company reached agreement with more than 63% of second lien note holders on the material terms of the restructuring.
On January 1, 2016, Kentucky joined a growing movement among states across the country to revise fraudulent transfer statutes. Kentucky accomplished this by repealing its statutes on fraudulent transfers and preferential transfers (KRS 378.010 et seq.), and replacing them with the Uniform Voidable Transactions Act (“UVTA”) (KRS 378A.005 et seq.). The UVTA was designed to replace the Uniform Fraudulent Transfer Act (“UFTA”) that was previously adopted by 43 other states (which did not include Kentucky).
In a typical application of the veil piercing remedy, an equity holder is held liable for the debts of the corporate entity it owns and controls. The tests courts use for determining when the remedy is available vary, but generally veil piercing may occur only where the equity holder has abused the corporate form, by using its control over an entity to commit a fraud or other injustice.
Practitioners generally identify “excusable neglect” as the standard that bankruptcy courts apply in determining whether to allow a creditor’s untimely proof of claim. A creditor who lets the bar date pass finds itself in the undesirable position of having to persuade the bankruptcy court that its neglect to file a timely proof of claim was excusable.