The Bankruptcy Protector
The Bankruptcy Protector
Imagine this: you sell a product to a company on credit at 8% interest until you are paid, and the company files for bankruptcy before repayment. Or maybe you are a hard money lender that made an unsecured loan at 18% to a company to bridge through hard times, and the company files for bankruptcy. Or maybe you are a secured creditor with a 5% loan on real estate, and after the borrower files for bankruptcy, you discover there is a defect in your mortgage and your lien can be stripped.
A person in possession of a debtor’s property upon a bankruptcy filing now has more guidance from the Supreme Court as to the effect of the automatic stay. In City of Chicago, Illinois v. Fulton, 141 S. Ct. 585 (2021), handed down on January 14 of 2021, the Court was faced with the issue of whether the City of Chicago (the “City”) was liable for violation of the automatic stay for refusing to return vehicles it impounded pre-petition. Issuing a narrow decision under Section 362(a)(3) of the Bankruptcy Code, the Court held that it was not.
Following the judgments in recent years on attribution to a company of its directors' knowledge in Bilta (UK) Ltd (In Liquidation) v Nazir [2015] UKSC 23 and UBS AG (London Branch) and another v Kommunale Wasserwerke Leipzig [2017] EWCA Civ 1567, the UK Supreme Court has once more returned to this issue in Singularis Holdings Ltd (in Official Liquidation) (a Company Incorporated in The Cayman Islands) v Daiwa Capital Markets Europe Ltd [2019] UKSC 50, in a case where a bank (Daiwa) was held liable for breaching its Quincecare duty of care to its customer,
Pacific Gas and Electric Company and PG&E Corporation (together “PG&E”) filed for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of California on January 29, 2019.
English courts recognise that shareholders hold a separate legal personality from the body corporate they own a stake in and will only go behind the corporate veil in limited circumstances. In the recent case of Onur Air Taşimacilik AŞ v Goldtrail Travel Ltd (In Liquidation) 1 , the Court of Appeal considered whether the financial means of the appellant’s wealthy controlling shareholder could be taken into account when making an order that the appellant had to make a substantial payment into court as a condition of being able to pursue its appeal.