Two recent decisions from circuit courts of appeal – the Fifth and Ninth – have addressed a question that does not arise often: in a solvent-debtor chapter 11 case, is the debtor required to pay post-petition interest (commonly referred to as “pendency interest”) to unsecured creditors in order to render such claims unimpaired? And, if so, what is the applicable rate of interest to use? Additionally, a subsequent decision from the Second Circuit, while not ultimately reaching the issue, favorably cited the recent Fifth and Ninth Circuit decisions.
In a recent decision by the Tenth Circuit Bankruptcy Appellate Panel, the court held that a chapter 7 trustee could not sell an LLC membership interest pursuant to section 363 of the Bankruptcy Code because of a transfer restriction within the LLC operating agreement. Malloy v. Trak-1 Technology Inc.(In re Kramer), No. 21-005, 2022 WL 17176411 (B.A.P. 10th Cir. Nov. 23, 2022).
When a debtor files for bankruptcy, it’s axiomatic that all creditors, wherever located, must immediately cease their efforts to collect on debts owed to them by that debtor, right? Not necessarily so, says the United States Court of Appeals for the Seventh Circuit, insofar as those creditors and their collateral are located outside of the United States.
The Irish High Court (Court) has pierced the corporate veil in Powers -v- Greymountain Management Ltd [In Liquidation] & Ors [2022] IEHC 599, to hold passive resident directors and non-resident shadow directors personally liable for funds lost to investors as a result of fraud.
The Facts
The Bankruptcy Protector
The High Court (Court) has appointed an inspector to investigate the affairs of a company following the first recorded application by a creditor, under Section 747 of the Companies Act 2014 (Act).
The Facts
The applicant, a creditor of WFS Forestry Ireland Limited (Company), and at least seventeen others, claimed that investments they made in the Company, in the form of loans and other advances, were not repaid when due.
In a recent decision, the Court of Appeal upheld a High Court finding, which granted a declaration under section 819 of the Companies Act 2014 (CA 2014), restricting the appellant director (Appellant) from acting as a director or secretary of a company for a period of five years, unless the company meets the requirements set out in subsection (3) of section 819.
The United States Court of Appeals for the Fifth Circuit entered its (second) opinion in the case of In re Ultra Petroleum Corporation, Case No. 21-20008, on October 14, 2022, potentially widening a circuit split on the issue of “make-whole” payments. With the circuit split potentially growing, this issue could be ripe for a grant of certiorari.
Under Irish and UK law, company directors owe fiduciary duties to act in good faith in the interests of the company. The company's interests in this context usually means the collective best interests of the members. However, UK and Irish authorities have developed directors' common law duties, such that in cases of insolvency, directors have a duty to consider the interests of the company's creditors.