Fifth Circuit finds that make-whole premiums should be considered unmatured interest subject to disallowance under Section 502(b)(2) of the Bankruptcy Code to the extent designed to compensate for future interest payments.

Overview

Possible application of Section 101(22)(A) to safe harbor’s covered entity requirement raises important questions for future transferee defendants.

Key Points:

• Merit Management raises the possibility that customers of “financial institutions” may qualify for protection under Section 546(e) safe harbor even if they would not otherwise meet Section 546(e)’s covered entity requirement.

• Treating customers of “financial institutions” as covered entities could broaden the scope of safe harbor.

In re Madoff Securities Extends Morrison Framework to Prevent Avoidance of Purely Foreign Transfers under SIPA and the Bankruptcy Code

The German Insolvency Code requires the management of German limited liability companies (GmbH), stock corporations (AG) and other entities without personal liability to file for the commencement of insolvency proceedings no later than three weeks after the entity has become illiquid (zahlungsunfähig) or overindebted (überschuldet).  

Following some delay, on June 6, 2012 the European Commission finally published its Proposal for a Directive of the European Parliament and the Council establishing a framework for the recovery and resolution of credit institutions and investment firms (so-called Crisis Management Directive¹ or CMD), which — once adopted — will apply to the 27 member states of the European Union (EU), but may also have relevance for those three contracting states of the Treaty on the European Economic Area (EEA), which are not member states of the EU.

English schemes of arrangement under the Companies Act 2006 (Schemes) have been increasingly used by non-English companies as a powerful tool to restructure their financial indebtedness. Recent prominent examples of German companies that have utilized Schemes to cramdown non-consenting or “holdout” creditors in order to restructure the company’s balance sheet include TeleColumbus, Rodenstock and Primacom.

There are several reasons for this trend: