In Harrington v. Purdue Pharma LP, in a 5-4 decision, the Supreme Court held that the Bankruptcy Code does not authorize bankruptcy courts to confirm a Chapter 11 bankruptcy plan that discharges creditors’ claims against third parties without the consent of the affected claimants. The decision rejects the bankruptcy plan of Purdue Pharma, which had released members of the Sackler family from liability for their role in the opioid crisis. Justice Gorsuch wrote the majority decision. Justice Kavanaugh dissented, joined by Chief Justice Roberts and Justices Kagan and Sotomayor.

The Grand Court of the Cayman Islands recently confirmed expressly for the first time that it has jurisdiction to wind up a segregated portfolio company ("SPC") on the insolvency of one or more, but not all, of its segregated portfolios, and to appoint restructuring officers over those segregated portfolios. The judgment is In the matter of Holt Fund SPC

Background

Introduction

The Grand Court of the Cayman Islands (Kawaley J) handed down a recent decision appointing receivers over a segregated portfolio, in the case of In the Matter of Green Asia Restructure Fund SPC[1].

What happens when a shady businessman transfers $1 million from one floundering car dealership to another via the bank account of an innocent immigrant? Will the first dealership’s future chapter 7 trustee be allowed to recover from the naïve newcomer as the “initial transferee” of a fraudulent transfer as per the strict letter of the law? Or will our brave courts of equity exercise their powers to prevent a most grave injustice?

Overview  

In a recent decision of the Grand Court of the Cayman Islands (the “Court”) concerning a supervision order in respect of a Cayman company in voluntary liquidation, Kawaley J considered the settled principles in a solvent Cayman Islands liquidation involving a dispute as to the identity of the official liquidators to be appointed.

The Proceeding 

A foreign (non-U.S.) company can be dragged unwillingly into a U.S. bankruptcy case if the bankruptcy court has “personal jurisdiction” over the company.

A foreign (non-U.S.) company can be dragged unwillingly into a U.S. bankruptcy case if the bankruptcy court has “personal jurisdiction” over the company.

The issue of whether directors, officers, and/or shareholders breached their fiduciary duties to a company prior to bankruptcy is commonly litigated in chapter 11 cases, as creditors look to additional sources for recovery, such as D&O insurance or “deep-pocket” shareholders, including private equity firms. The recent decision in In re AMC Investors, LLC, 637 B.R. 43 (Bankr. D. Del. 2022) provides a helpful reminder of the importance of timing in bringing such claims and the use by defendants of affirmative defenses to defeat those claims.

There is a common misconception that lender liability is a thing of the past. However, a recent decision provides a warning to lenders that they can be held liable and face substantial damages if they exercise excessive control over a debtor’s business affairs.