Among the many financial innovations that came out of the COVID era, non-pro rata uptier transactions as a liability management exercise (“LMEs”) are among the more controversial. While lawsuits challenging non-pro rata uptier transactions are making their way through the courts, two important decisions were recently issued by the Court of Appeals for the Fifth Circuit and the New York Appellate Division.
On average, the Supreme Court hears a single bankruptcy case each term. But during the October 2022 term, the Supreme Court issued a remarkable four decisions in bankruptcy cases. These decisions, which are summarized below, address appellate issues relating to sale orders, the discharge of claims obtained by fraud, and sovereign immunity issues in two different contexts.
I. Section 363(m) of the Bankruptcy Code is not a jurisdictional provision that precludes appellate review of asset sale orders.
Businesses in a wide range of industries may now be forced to consider bankruptcy given the unprecedented economic challenges caused by the COVID-19 pandemic. This advisory is designed to provide a high-level view of issues to be considered by human resources when considering filing for Chapter 11 bankruptcy. Please note that this advisory focuses specifically on a Chapter 11 bankruptcy (pursuant to which a business will be reorganized) rather than Chapter 7 bankruptcy (pursuant to which a business will be liquidated).
Earlier this month, the Supreme Court announced that it will review the scope of Bankruptcy Code section 546(e)’s safe harbor provision. Section 546(e) protects from avoidance those transfers that are made “by or to (or for the benefit of)” a financial institution, except where there is actual fraud. The safe harbor is intended to ensure the stability of the securities market in the event of corporate restructurings.
In a recent decision (“Energy Future Holdings”) poised to have wide-reaching implications, the Third Circuit Court of Appeals reversed the decisions of the Bankruptcy and the District Courts to hold that a debtor cannot use a voluntary Chapter 11 bankruptcy filing to escape liability for a “make-whole” premium if express contractual language requires such payment when the borrower makes an optional redemption prior to a date certain.
A party's right to terminate a contract in the event that the other party becomes insolvent is one of the most commonly seen termination rights in outsourcing and technology agreements. However, the effectiveness of such provisions in the future could change in agreements governing the provision of IT services, as the new Enterprise and Regulatory Reform Act 2013 gives the Government the power to extend the law that currently protects supplies of gas, water, electricity and communication services during an organisation's insolvency to the supply of IT services.
Introduction
Introduction