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 right to effectively avoid the illegitimate removal of assets from a company in financial difficulties is a key element of any insolvency law that protects the rights of creditors and maximises the recovery of value from the insolvent company.

Czech insolvency law, and in particular the insolvency avoidance rights, play a significant role as a recovery tool for creditors in insolvency proceedings, but in practice mainly act as a preventive warning signal for a debtor and its creditors when trading, even before financial problems arise.

After more than two years of delay, preventive restructuring has finally become available to companies in financial difficulties in the Czech Republic. Czech companies can now seek to restructure their troubled businesses outside formal insolvency proceedings with the help of new rules specifically designed to keep their viable business operating and to prevent insolvency.

A pre-pack insolvency sale, which is an expedited liquidation proceeding that allow for the sale of all or part of a debtor’s business as a going concern to the best bidder shortly after the insolvency proceedings are opened, is not formally regulated in the Czech Republic.

Introduction

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?

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.