What’s the News?

A US Bankruptcy Judge recently approved the sale of a package of RadioShack’s intellectual property assets—including consumer data obtained from RadioShack customers—to General Wireless Inc., the hedge fund affiliate that acquired over 1,700 RadioShack stores in February. The sale was not without controversy.

Much has been written in the past several years regarding the scope of a bankruptcy court’s jurisdiction in the wake of the Supreme Court’s decisions in Stern v. Marshall, 564 U.S. ___ (2011) and Executive Benefits Ins. Agency v. Arkison, 573 U.S. ___ (2014). Now, the Supreme Court has weighed in again in the case of Wellness Int’l Network, Ltd., et al v. Sharif, 575 U.S. ___ (2015) in an attempt to clarify the confusion created by Stern.

On 20 May 2015 the European Parliament adopted a recast of the European Insolvency Regulation. The Recast Regulation is in line with the EU’s current political priorities of promoting economic recovery and boosting growth and employment. The key objectives of the Recast Regulation are to move away from the traditional liquidation approach towards more of a “second chance approach” for businesses and entrepreneurs in financial difficulties, and to enhance cooperation and coordination in cross-border insolvency proceedings. 

Scope

The High Court has found two former directors of a car dealership in Dublin, Appleyard Motors Limited (In Liquidation) (Appleyard), personally liable to a former customer who paid for but did not receive three vehicles in the weeks leading up to the company’s liquidation. This case is particularly noteworthy as it is only the second time a director has been held personally liable for a company’s debts for reckless trading.

Chief Judge Leonard P. Stark of the District Court for the District of Delaware reversed and remanded the decision of the Bankruptcy Court which approved a Bankruptcy Rule 9019 settlement that Judge Stark concluded had been inadequately noticed under the circumstances.

Chief Judge Cecelia G. Morris of the Bankruptcy Court for the Southern District of New York decided that banks may not place an administrative freeze, even a temporary one, on the bank account of an individual who files for bankruptcy.

* This article was first published by INSOL International on April 17, 2015.

The bankruptcy case of Energy Future Holdings (EFH) and its affiliates has already provided the Delaware bankruptcy court occasion to tackle a number of important bankruptcy questions, including the propriety of using tender offers to settle noteholder claims during the pendency of the case.

A recent Delaware District Court decision concerning an appeal of a bankruptcy settlement clearly provides support for the use of tender offers or other exchange, or settlement mechanics permitted under applicable federal securities laws prior to and outside a plan of reorganization. In essence, this decision permits debtors to utilize exchange offers to repurchase outstanding securities at a discount, or obtain more favorable terms during a bankruptcy proceeding and prior to confirmation of a plan of reorganization.

Case Summary

The Second Circuit in Krys v. Farnum Place (In re Fairfield Sentry Ltd.)¹ denied a petition for rehearing or rehearing en banc by Appellee Farnum Place, LLC (Farnum), a hedge fund that sought to protect its purchase of a $230 million claim against the bankruptcy estate of Bernard L.