- Introduction
The doctrine of equitable subordination in bankruptcy cases has long been recognized by U.S. courts and subsequently codified in the United States in section 510(c) of the U.S. Bankruptcy Code.1
The U.S. Supreme Court ruled on May 29, 2012, that secured lenders have the right to credit bid their debt instead of having to pay cash in an auction of their collateral as part of a Chapter 11 plan of reorganization.
The U.S. Court of Appeals for the 11th Circuit recently issued its opinion in one of the largest fraudulent transfer litigations against lenders.
On March 9, 2012, the Ontario Superior Court decided several motions regarding five Ontario properties formerly owned by Nortel Networks Corporation, including one property in which Nortel retained a partial interest. The properties had been contaminated as a result of historical manufacturing on the properties.
A U.S. bankruptcy judge in Delaware has held that the two-year "look-back" period in which a transfer occurring within two years of the bankruptcy petition filing date may be avoided, under Section 548 of the U.S. Bankruptcy Code, cannot be equitably tolled. After some inconsistent orders about whether the courts may broaden the look-back period, this decision should give greater certainty to lenders when evaluating their exposure upon the commencement of a bankruptcy case by a borrower.
Part IV of the Companies' Creditors Arrangement Act and Chapter 15 of the U.S. Bankruptcy Code have adopted the UNCITRAL Model Law with certain modifications.
Co-authored by Pamela L.J. Huff, Blake, Cassels & Graydon LLP.
From time immemorial, banks and other secured lenders have relied on their ability to "credit bid" for their collateral as a key source of protection and negotiating leverage against debtors and competing bankruptcy acquirors. Credit bidding secured debt rather than paying cash for collateral has been an effective counterweight against a debtor’s protections of the automatic stay and its exclusive right to control the plan formulation process and bankruptcy sales under Section 363 of the Bankruptcy Code.
U.S. bankruptcy courts may be advantageous forums for foreign liquidators to organize large scale lawsuits; however, courts will impose limitations.
A U.S. bankruptcy court has held that the tolling provisions in the U.S. Bankruptcy Code allowing for extensions of the time to file actions are automatically available to foreign representatives trying to marshal assets for distribution to creditors in crossborder cases.
A ruling on April 7, 2011 by the Ontario Court of Appeal has resulted in deemed trust and unsecured breach of fiduciary duty claims in favour of pension beneficiaries being given priority ahead of court-ordered “super-priority” charges.