Close economic ties and interdependence between the US and Canada have been bolstered by free trade policies and intensified global competition, paving the way for continued opportunities for US businesses to tap into the Canadian market. These opportunities have resulted in an active cross-border lending market. In light of this, US lenders who are lending into Canada may encounter, and should be aware of, Canadian-specific legal issues and considerations.

We have blogged a fewtimes about the Supreme Court’s decision in Siegel v. Fitzgerald and its implications.

“How did you go bankrupt?

“Two ways. Gradually, then suddenly.”

- Ernest Hemingway, The Sun Also Rises

Whether from internal or external factors, every company at some point will experience financial stress. The key to avoiding the extreme zone of financial distress—insolvency and “suddenly” bankruptcy—is to be proactive early on—when financial challenges are progressing “gradually.”

When a company is not likely to survive a restructuring, its assets may have value to a third-party buyer. Absent legal protection, a buyer of a financially distressed business will usually be concerned that the company’s creditors could pursue the acquired business on various legal theories, including “successor liability,” and on that basis may decline to purchase assets of such a business.

All too often, vendors and suppliers are paralyzed by a customer’s bankruptcy filing (that is, if they are even aware of it in a timely manner). The lack of action, or awareness, could wind up costing these creditors valuable recovery. In this alert, we discuss administrative claims under Section 503(b)(9) of the Bankruptcy Code.

The Bankruptcy Code’s Subchapter V provides hope to formerly successful entrepreneurs. It’s a hope that never before existed.

I’ll try to explain.

Formerly Successful Entrepreneurs – A Historical Problem

The Bankruptcy Code became effective in October of 1979. And I’ve been practicing under the Bankruptcy Code from the beginning: licensed in 1980.

Here’s an observation that’s been true throughout my career, until enactment of Subchapter V:

Bankruptcy Basics for New and Non-Bankruptcy Attorneys

This entry is part of Nelson Mullins’s ongoing “Bankruptcy Basics” blog series that is intended to address foundational aspects of bankruptcy for new and non-bankruptcy practitioners and professionals. This entry will discuss the general structure of bankruptcy claims and the differences between how unsecured, secured, and priority claims are treated in a bankruptcy case.

A “claim” against a bankruptcy estate is defined as a:

Federal Deposit Insurance Corporation (“FDIC”) Chair Martin Gruenberg gave remarks to the Cities for Financial Empowerment Fund 2023 Bank On National Conference yesterday in which he said that the FDIC “shares the Bank On movement’s commitment to advancing Americans’ economic inclusion in the banking system.”

Answers to these two questions can get tricky:

1. When should a previously successful business engage distress-debt counsel?
2. What is the role of the business’s general counsel once that happens?

Second Question: Role

Here’s the answer to the second question first:

On May 8, cryptocurrency platform Bittrex filed for chapter 11 in Delaware. Bittrex’s first day filings emphasize that, unlike many other crypto filings over the past year, this case is not a “free fall” bankruptcy. In fact, a plan has already been filed, and the first day declaration said the debtors “took extensive action pre-petition to ensure full customer recovery, and plan to swiftly bring these chapter 11 cases to a responsible conclusion.”