Validation orders under s127 Insolvency Act 1986 will only be made:
- in special circumstances
- where a particular transaction is one that is in the interests of the creditors as a whole; and
- the circumstances warrant the overriding of the pari passu principle
The Facts
Key points
- Automatic stays on proceedings are imposed by Article 20 of the UNCITRAL Model Law (and mirrored in s.130(2) IA 1986)
- The case reinforces the principle that automatic stays are designed to avoid the unnecessary expenditure of assets otherwise available for distribution amongst creditors
The facts
In a June 3, 2016 decision1 , the United States Bankruptcy Court for the District of Delaware (“the Bankruptcy Court”) invalidated, on federal public policy grounds, a provision in the debtorLLC’s operating agreement that it viewed as hindering the LLC’s right to file for bankruptcy. Such provision provided that the consent of all members of the LLC, including a creditor holding a so-called “golden share” received pursuant to a forbearance agreement, was required for the debtor to commence a voluntary bankruptcy case.
The Facts
A owned two properties, one of which had been divided into two separately rateable properties for council tax purposes. R presented a bankruptcy petition against A based on a purported debt of £14,097.59 owed by A in respect of unpaid council tax for which it had obtained liability orders from the Magistrates Court.
In its recently issued decision in Husky International Electronics, Inc. v. Ritz, a 7-1 majority of the Supreme Court has clarified that intentionally fraudulent transfers designed to hinder or defraud creditors can fall within the definition of “actual fraud” under Section 523(a)(2)(A) of the Bankruptcy Code and can sometimes result in corresponding liabilities being non-dischargeable in a personal bankruptcy proceeding.1
Key points
Rights under s23, s24 and s31 of the Matrimonial Causes Act 1973 (the “Act”) can only be pursued by the spouses themselves. Consequently, any ongoing action brought pursuant to those sections of the Act does not vest in the trustee in bankruptcy on appointment.
The facts
In a March 29, 2016 decision,1 the United States Court of Appeals for the Second Circuit (the "Court of Appeals") held that creditors are preempted from asserting state law constructive fraudulent conveyance claims by virtue of the Bankruptcy Code's "safe harbors" that, among other things, exempt transfers made in connection with a contract for the purchase, sale or loan of a security (here, in the context of a leveraged buyout ("LBO")), from being clawed back into the bankruptcy estate for distribution to creditors.
Key points
- Without notice applications for recognition orders carry the obligation of full and frank disclosure to the English court in relation to the effect such orders may have on third parties.
- Failure to provide full and frank disclosure may have cost consequences.
The facts
Key Point
The court adjourned a bankruptcy hearing on the basis that a Spanish court sanctioned liquidation plan for a group of companies in which the debtor had an interest might release value for creditors.
The Facts
On January 4, 2016, the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) deviated from SDNY precedent and held that, despite the absence of clear Congressional intent, the avoidance powers provided for under Section 548 of the Bankruptcy Code can be applied extraterritorially. As a result, a fraudulent transfer of property of a debtor’s estate that occurs outside of the United States can be recovered under Section 550 of the Bankruptcy Code.