Corrupt managerial behavior has been a driver in the collapse of the cryptocurrency market. Enforcing and defending claims against directors and officers, where the directors and officers are not living in the United States and may not be U.S. citizens, is a current judicial focus in the U.S. litigation system. In the Three Arrows Capital (“Three Arrows”) chapter 15 case, the U.S. Bankruptcy Court for the Southern District of New York (the “U.S.
Nature abhors a vacuum. Equipment finance abhors bankruptcy. Whether in securitized or large, single-asset financings, financiers structure transactions to be “bankruptcy remote.” This article will discuss a December 2021 bankruptcy court bench ruling that found certain protective provisions to be unenforceable and describe how those provisions might have been devised to survive the court’s scrutiny.
Chapter 15 of the U.S. Bankruptcy Code provides a streamlined process for recognition (a form of comity) of a foreign insolvency proceeding. However, courts are divided as to whether a foreign debtor must satisfy the general definition of “debtor” as that term is used in section 109(a) of the Bankruptcy Code, which requires a debtor seeking bankruptcy relief to reside or have a domicile, a place of business, or property in the United States.
In 2005, the United States adopted the Model Law on Cross-Border Insolvency, promulgated by the United Nations Commission on Internal Trade, under chapter 15 of the United States Bankruptcy Code. In so adopting, Congress intended chapter 15 “to be the exclusive door to ancillary assistance to foreign proceedings.” H.R.Rep. No. 109–31, at 110–11 (2005). Notwithstanding the express congressional intent, not all courts have required chapter 15 relief as a prerequisite to seeking relief in a pending civil litigation against a debtor.
While long-term care facilities have generally been kept afloat over the last year through various stimulus packages and lenders willing to work through defaults given the pandemic, some may face financial trouble in the near future due to litigation arising from deaths related to COVID-19.
The impact of COVID-19 is being felt at all levels of the economy and will work its way through bankruptcy courts for years to come. In these early days, many creditors who are themselves suffering are providing assistance to troubled companies. Suppliers and commercial landlords are agreeing to various forms of relief, including modified credit terms and rent relief to allow customers to bridge this period of unprecedented disruption. While these corporate good Samaritans are providing immediate aid they may be subjecting themselves to the risk of future losses.
The economic fallout from the COVID-19 pandemic will leave in its wake a significant increase in commercial chapter 11 filings. Many of these cases will feature extensive litigation involving breach of contract claims, business interruption insurance disputes, and common law causes of action based on novel interpretations of long-standing legal doctrines such as force majeure.
Last week, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law, implementing broad relief for individuals and businesses affected by COVID-19. One of the sections of the CARES Act receiving less attention is a temporary amendment to the Bankruptcy Code to provide streamlined reorganization procedures for businesses with debt of less than $7.5 million.
As the nation hunkers down to combat the novel coronavirus (COVID-19), bankruptcy courts throughout the country have moved quickly to implement procedures to preserve access to the courts while limiting in-person interaction during the crisis. Each court’s specific COVID-19 procedures are different, but they largely prohibit in-person hearings, recognize the need for flexibility and adjournments for non-emergent matters whenever possible, and encourage the creative use of technology to allow as many matters to go forward as scheduled, including evidentiary hearings.
Social distancing. Elbow bumps. Flatten the curve. These are the new phrases and behaviors we have learned to avoid exposure to the novel coronavirus (COVID-19). This epic struggle forces us to reexamine and reevaluate our daily habits, lifestyles and customs as we work collectively to minimize the harm to our families, friends and neighbors throughout the United States.