The securities safe harbor protection of Bankruptcy Code (“Code”) § 546(e) does not protect allegedly fraudulent “transfers in which financial institutions served as mere conduits,” held the U.S. Supreme Court on Feb. 27, 2018. Merit Management Group LP v. FTI Consulting Inc., 2018 WL 1054879, *7 (2018). Affirming the Seventh Circuit’s reinstatement of the bankruptcy trustee’s complaint alleging the insolvent debtor’s overpayment for a stock interest, the Court found the payment not covered by §546(e) and thus recoverable. The district court had dismissed the trustee’s claim.

In the latest decision in the long running Pugachevdispute, the High Court considered the effect of five trusts set up by Mr Pugachev, and whether the trusts were shams. Birss J held that he would have been prepared to declare the five trusts shams, but on the true interpretation of the trust documents and considering the powers reserved to Mr Pugachev as protector, all five trusts were, in effect, bare trusts for the benefit of Mr Pugachev.

The Federal Rules of Bankruptcy Procedure (“Bankruptcy Rules”) require each corporate party in an adversary proceeding (i.e., a bankruptcy court suit) to file a statement identifying the holders of “10% or more” of the party’s equity interests. Fed. R. Bankr. P. 7007.1(a). Bankruptcy Judge Martin Glenn, relying on another local Bankruptcy Rule (Bankr. S.D.N.Y. R.

The safe harbor protection of Bankruptcy Code (“Code”) §546(e) does not protect “transfers that are simply conducted through financial institutions,” held the U.S. Court of Appeals for the Seventh Circuit on July 28, 2016. FTI Consulting Inc. v. Merit Management Group LP, 2016 WL 4036408, *1 (7th Cir. July 28, 2016).

In Erceg v Erceg¹ the New Zealand Court of Appeal ruled on the standing of bankrupt beneficiaries to bring claims against trustees. In addition, the Court considered the role of trustee discretion when determining beneficiary access to trust documentation. The decision is useful for trustees and beneficiaries alike, and provides clarity on the steps a Court may take when deciding whether or not to grant beneficiaries disclosure of trust information. Although this is a New Zealand decision, other common law courts such as Hong Kong may reach similar conclusions.

INTRODUCTION

The use of trusts for asset protection purposes is well established and – in principle – not improper. However, recent history has seen increasing attempts by creditors to have transfers of assets unwound. A recent UK Supreme Court case saw the Court effectively achieve this by way of a resulting trust finding.1 This article considers the issue from a different angle: insolvency legislation.

In Lockston Group Inc v Nicholas Stewart Wood [2015] EWHC 2962 (Ch), the English High Court held that foreign currency claims and claims for interest in a deceased insolvent's estate should be calculated at the date of death, rather than the date of any insolvency administration order. This case serves as a reminder of the importance of the pari passu principle in insolvency law and the requirement for a single date for ascertaining a deceased insolvent's liabilities.

Facts

In its landmark decision of Kam Leung Sui Kwan v Kam Kwan Lai & Ors FACV 4/2015, issued yesterday, the Court of Final Appeal has brought some closure to the long running Yung Kee restaurant matter by making a winding up order against Yung Kee Holdings Limited (YKHL) with a 28-day stay to allow the parties to consider possible buy-out opportunities.  This reverses the previous decisions in the Court of First Instance and the

In Paul David Wood & Anor v Timothy Darren Baker & Ors, the joint trustees in bankruptcy of the bankrupt's property successfully obtained injunctions freezing the assets and business of the respondents and restraining them from dealing with such assets and business.  This case is an illustration of how the court may apply the "evasion principle", a principle identified in the decision of the Supreme Court in the case of Prest v Petrodel Resources Ltd, in piercing the corporate veil.

Background

Bankruptcy courts may hear state law disputes “when the parties knowingly and voluntarily consent,” held the U.S. Supreme Court on May 26, 2015. Wellness Int’l Network Ltd. v. Sharif, 2015 WL 2456619, at *3 (May 26, 2015). That consent, moreover, need not be express, reasoned the Court. Id. at *9 (“Nothing in the Constitution requires that consent to adjudication by a bankruptcy court be express.”). Reversing the U.S.