Section 541(a) of the Bankruptcy Code creates a worldwide estate comprising all of the legal or equitable interests of the debtor, “wherever located,” held by the debtor as of the filing date.1 The Bankruptcy Code’s automatic stay, in turn, applies “to all entities” and protects the debtor’s property and the bankruptcy court’s jurisdiction by barring “any act to obtain possession of property of the estate . . .
On September 2, the Delaware Supreme Court affirmed a holding by the Court of Chancery that creditors of insolvent Delaware limited liability companies do not have standing to sue derivatively. This contrasts with Delaware corporations: the Delaware courts have recognized that when a corporation becomes insolvent, creditors become the residual risk-bearers and are permitted to sue derivatively on behalf of a corporation to the same extent as stockholders.
Introduction
On June 23, 2011, after fifteen years of hugely acrimonious litigation, the Supreme Court of the United States (the “Court”) issued a decision on a narrow legal issue that may end up significantly limiting the scope of bankruptcy courts’ core jurisdiction.
Section 108 of the Bankruptcy Code grants a two-year extension of time for a trustee in bankruptcy (or a debtor in possession) to bring law suits, provided that the applicable period to sue didn’t expire before the petition date. It also gives a short extension to the trustee for filing pleadings, curing defaults, and performing other acts on behalf of the debtor. These provisions afford a trustee and debtor in possession valuable time to discover and evaluate potential causes of action and to perform other acts to preserve the debtor’s rights.
On November 17th, Lehman Brothers Special Financing Inc. ("LBSF") and its official unsecured creditors' committee filed a joint motion to stay BNY Corporate Trustee Services Limited's ("BNY") appeal for 90 days in the "Dante" matter, pending final settlement of the dispute between LBSF and Perpetual Trustee Company Limited ("Perpetual").
On September 20th, the United States District Court for the Southern District of New York granted BNY Corporate Trustee Services Limited ("BNY") leave to appeal the bankruptcy court's decision in the Lehman "Dante" matter. In its January decision, the bankruptcy court had voided certain document provisions providing for the subordination of a swap counterparty's rights to an early termination payment when the swap counterparty or one of its close affiliates went into bankruptcy. BNY holds the collateral subject to this dispute.
In a decision filed on July 7th, the United States Court of Appeals for the Third Circuit affirmed a district court decision upholding a bankruptcy court order granting summary judgment to American Home Mortgage Investment Corp. (American Home) in connection with a repurchase transaction entered into in 2007 under which American Home sold certain certificates to Bear Stearns International Ltd. (Bear Stearns) for $19,534,000 and agreed to re-purchase the certificates at a later date for $19,636,879.07. In re American Home Mortgage Holdings, Inc., 2010 WL 2676383 (3d Cir.
In a recent decision, SEC v Byers,1 the Second Circuit Court of Appeals held that district courts possess the authority and discretion to bar the filing of involuntary bankruptcy petitions without the district court’s permission.
Chapter 15 of the Bankruptcy Code permits a foreign representative of a foreign insolvency proceeding to seek a bankruptcy court’s assistance in an ancillary proceeding upon recognition of the foreign proceeding. Upon recognition, Chapter 15 empowers a bankruptcy court to grant broad relief to a foreign representative to protect the assets of the debtor or the interests of its creditors in the United States.
Credit bidding of debt held by a secured creditor at a sale of collateral under section 363 of the Bankruptcy Code has become commonplace.1 Does a secured creditor have that same ability in a sale under a chapter 11 plan? Most thought so, but according to the Third Circuit Court of Appeals, not always.