CLIENT PUBLICATION FINANCIAL RESTRUCTURING & INSOLVENCY | August 9, 2016 Not So Safe After All?
CLIENT PUBLICATION Financial Restructuring & Insolvency | August 9, 2016 Judge Chapman Flips the Script US Bankruptcy Court for the Southern District of NY Grants Noteholders’ Motion to Dismiss Based on Lehman’s Failure to State Claim With Respect to Flip-Clause Litigation On June 28, 2016, in what essentially was a clean sweep for the noteholder and trust certificate holder defendants (the “Noteholders”), the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) granted an omnibus motion to dismiss Lehman Brothers Special Financing, Inc.’s (“LBSF
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.
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
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.
On March 23, 2016, the European Commission launched a consultation seeking views on key insolvency principles and standards which could ensure that national insolvency frameworks work in a cross-border context. The consultation is part of the Commission’s Capital Markets Union Action Plan which aims to remove barriers to the free flow of capital. Responses will be used to identify which aspects could be included in a legislative initiative or other related actions.
A recent decision of the Court of Appeal has seemingly halted a trend towards leniency in the High Court in applications for the restriction and disqualification of directors of insolvent companies, particularly where the company has been struck off the register of companies for failing to file annual returns.
On January 4, 2016, the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) deviated from SDNY precedent and held that, despite the absence of clear Congressional intent, the avoidance powers provided for under Section 548 of the Bankruptcy Code can be applied extraterritorially. As a result, a fraudulent transfer of property of a debtor’s estate that occurs outside of the United States can be recovered under Section 550 of the Bankruptcy Code.
The Irish High Court recently, for the first time, recognised and gave effect to a Swiss law insolvency and restructuring process that had been commenced in Switzerland in respect of a Swiss company.
The Bankruptcy (Amendment) Bill 2015 has been passed without amendment and was signed by the President on Christmas Day 2015. The headline amendment in the Bill is the reduction of the term of Bankruptcy from 3 years to 1 year which mirrors the term of bankruptcy in the UK. In addition to certain procedural amendments, the key amendments are summarised as follows: