In less than a week after its bankruptcy filing, a debtor was able to obtain confirmation of its prepackaged plan of reorganization in the Bankruptcy Court for the Southern District of New York. In allowing the case to be confirmed on a compressed timeframe that was unprecedented for cases filed in the Southern District of New York, the Bankruptcy Court held that the 28-day notice period for confirmation of a chapter 11 plan could run coextensively with the period under which creditor votes on the plan were solicited prior to the commencement of the bankruptcy case.
The Fatcs
A gift card retailer entered creditors’ voluntary liquidation with an estimated deficiency of £2.8 million. The liquidators subsequently sought declarations that various categories of payments made to the wife of the sole director and shareholder of the company, who was employed as its book keeper, constituted transactions at an undervalue. Mrs Lawson claimed that the payments, which were made to a joint bank account in her and Mr Lawson’s name, were made to discharge expense claims.
The Decision
Having launched the original version three years ago, we have refreshed our Safeguarding Your Business guide as an eBook. The guide assists clients in protecting themselves either proactively or reactively in respect of a counterparty’s insolvency with new sections on trusts and examples of how we have helped, using some of the principles raised.
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
On 31 July 2012, a bankruptcy order was made in respect of Mr Dean Jonathan D’Eye on the basis of a statutory demand dated 11 July 2011.
During their investigations, his trustees in bankruptcy discovered that Mr D’Eye had made a payment of £321,919 to his father on 24 January 2012 (the Payment) and, after the presentation of the bankruptcy petition on 28 May 2012, a significant portion of this money had then been used to purchase a flat (the Flat).
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
Creditors petitioning for bankruptcy must carefully consider offers to settle debts and make a reasonable decision based on the circumstances.
The facts
A bankrupt sought permission to appeal his bankruptcy order on the basis that the Deputy District Judge incorrectly held that the petitioning creditor did not act unreasonably in rejecting the bankrupt’s offer to compound the debt and, therefore, ought to have dismissed the petition pursuant to Section 271(3) of the Insolvency Act 1986.
The decision
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.