The continued fall-out of the high-profile collapse of the Three Arrows crypto fund has seen another development, with the BVI Court permitting alternative service by Twitter after the collapsed fund's directors failed to appear for examination before the BVI Court.(1)
Contrasting opinions from any court, issued a month apart, are always instructive.
And we have a new such thing—from the U.S. Supreme Court, no less, and from May and June of this year. The contrast is on this subject: whether sovereign immunities of Puerto Rico and of a federally recognized tribe are abrogated in bankruptcy.
“Were Congress to . . . intervene and expand § 524(g) beyond asbestos cases, bankruptcy would become a more suitable alternative for resolving mass tort cases. Until then, such cases will likely remain problematic under the Code in the face of creditor opposition.”
Subchapter V of the Bankruptcy Code’s Chapter 11 is relatively new: it took effect as a new law on February 19, 2020. Accordingly, new questions continue to arise on how its terms and provisions should be applied.
A Trustee Fees Question
One Subchapter V question is this:
- When does a Subchapter V trustee’s administrative claim for fees and costs get paid?
A Regular Chapter 11 Answer
The answer in regular Chapter 11 has always been this:
The Royal Court has recently handed down the final decision in the matter of Eagle Holdings Limited (in compulsory liquidation).[1] In this decision, the Royal Court of Guernsey provided guidance and assistance to the joint liquidators regarding a distribution of surplus funds.
When a federal court approves a [bankruptcy] plan allowing someone to put its hands into another person’s pockets, the person with the pockets is entitled to be fully heard and to have legitimate objections addressed.[Fn. 1]
Pop Quiz Question:
Does Insurer, in the following facts, have standing to object to Debtor’s Chapter 11 plan?
Debtor is in bankruptcy because of asbestos lawsuits.
Debtor proposes a Chapter 11 plan that is supported by all constituencies—except one:
Feasibility of a bankruptcy plan is always a tough issue.
Think about it:
- debtors are in bankruptcy because they can’t make their payments when due; and
- in bankruptcy, a debtor must propose a plan for paying creditors—that will work this time.
We now have a new plan feasibility opinion—from the Eighth Circuit BAP—that provides guidance to us all.
Currently, the British Virgin Islands has no legislative framework for regulating third party litigation funding. Until recently, the absence of such a framework led many to believe that the rules against maintenance and champerty still operated so as in practice to prevent litigants from raising funds from third parties to prosecute or to defend claims. In Crumpler v Exential Investments Inc (BVIHC(COM) 2020/0081; 29 September 2020) Jack J clarified that third party funding arrangements were enforceable in the BVI.
The Bankruptcy Code’s Subchapter V provides hope to formerly successful entrepreneurs. It’s a hope that never before existed.
I’ll try to explain.
Formerly Successful Entrepreneurs – A Historical Problem
The Bankruptcy Code became effective in October of 1979. And I’ve been practicing under the Bankruptcy Code from the beginning: licensed in 1980.
Here’s an observation that’s been true throughout my career, until enactment of Subchapter V: