On June 20, 2018, the United States Bankruptcy Court for the District of Delaware issued a decision sustaining the debtors’ objection to the proof of claim filed by Contrarian Funds, LLC.

When it comes to voting on a plan, Section 1126(e) of the Bankruptcy Code provides that a bankruptcy court may designate (or disallow) the votes of any entity whose vote to accept or reject was not made in “good faith” (a term that is not defined in the Bankruptcy Code).

Section 546(e) of the Bankruptcy Code shields certain transfers involving settlement payments and other payments in connection with securities contracts (for example, payment for stock) made to certain financial intermediaries, such as banks, from avoidance as a fraudulent conveyance or preferential transfer. In recent years, several circuit courts interpreted 546(e) as applying to a transfer that flows through a financial intermediary, even if the ultimate recipient of the transfer would not qualify for the protection of 546(e).

Key points

• Where the underlying liability on which a bankruptcy order is made is subsequently set aside, the correct remedy is rescission under s.375(1) of the Insolvency Act 1986.

• Annulment under s.282(1)(a) is the appropriate remedy when, on grounds existing at the time of making the bankruptcy order, the order ought not to have been made.

The facts

On October 20, 2017, the United States Court of Appeals for the Second Circuit issued a decision which, among other things,[1] affirmed the lower courts’ holding that certain noteholders were not entitled to payment of a make-whole premium. The Second Circuit held that the make-whole premium only was due in the case of an optional redemption, and not in the case of an acceleration brought about by a bankruptcy filing.

On October 20, 2017, the United States Court of Appeals for the Second Circuit issued an important decision regarding the manner in which interest must be calculated to satisfy the cramdown requirements in a chapter 11 case.[1] The Second Circuit sided with Momentive’s senior noteholders and found that “take back” paper issued pursuant to a chapter 11 plan should bear a market rate of interest when the market rate can be ascerta

On October 3, 2017, Bankruptcy Judge Laurie Selber Silverstein of the United States Bankruptcy Court for the District of Delaware issued a decision holding that the Bankruptcy Court had constitutional authority to approve third-party releases in a final order confirming a plan of reorganization.

Key point

• In certain circumstances the court will look to parallel statutory provisions where existing applicable statute does not accommodate the situation, as long as the latter is not offended, expanded or altered by doing so.

The facts

This application for directions was brought by the administrators of Lehman Brothers Europe Ltd (the “Company”) on:

Key Points

• Statutory powers are to be exercised in accordance with a company’s articles of association
• The Duomatic principle cannot simply be used as a bandage to cure a company’s procedural errors

The Facts

This appeal considered whether the sole director of a company, whose articles required two directors for its board meeting to be quorate, could validly appoint administrators under paragraph 22 Schedule B1 of the Insolvency Act 1986.

Key points

• The dismissal of the appellant’s previous application for an annulment of a bankruptcy order was a serious procedural irregularity
• A court may annul a bankruptcy order under s 282 IA 1986 if it is satisfied that the order ought not to have been made based on grounds existing at the time the order was made
• In relation to appeals made pursuant to s 375 IA 1986 to review or rescind the decision of a lower court, the court may consider fresh material.

The facts