In a memorandum decision dated May 4, 2015, Judge Vincent L. Briccetti of the United States District Court for the Southern District of New York affirmed the September 2014 decision of Judge Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York, confirming the joint plans of reorganization (the “Plan”) in the Chapter 11 cases of MPM Silicones LLC and its affiliates (“Momentive”). Appeals were taken on three separate parts of Judge Drain’s confirmation decision, each of which ultimately was affirmed by the district court:
Can a creditor cancel an agreement with a company in business rescue and what is the consequence of a business rescue practitioner suspending an agreement before cancellation?
The lawfulness of cancelling a contract during business rescue
The advent of the new Companies Act 71 of 2008 (the Act) brought with it a shift from a creditor-protectionist society towards a business rescue model that is debtor-protectionist. In consequence, there has been a swarm of applications taking advantage and exploiting this new scheme. This shift has unfortunately led to considerable abuse of the business rescue procedure.
Dealing a major blow to the trustee’s efforts to recover fraudulent transfers on behalf of the bankruptcy estate of the company run by Bernard Madoff, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York held in SIPC v. Bernard L. Madoff Investment Securities LLC1 that the Bankruptcy Code cannot be used to recover fraudulent transfers of funds that occur entirely outside the United States.