On June 26, the UK Financial Services Authority (FSA) announced that it obtained a bankruptcy order against Samuel Nathan Kahn who controlled the affairs of Chesteroak Limited (Chesteroak) and Bingen Investments Limited (Bingen). Chesteroak and Bingen were two UK-based companies that helped illegal offshore boiler rooms sell shares to investors.

With the possibility of a major stock brokerage liquidation appearing more likely than it has been in recent periods, the effect of a liquidation on customers and financial counterparties has become of great interest to many of our clients and others.

In the recent case of Re I. Waxman & Sons Limited (“Waxman”), the Ontario Superior Court of Justice reviewed the treatment in Canada of the doctrine of equitable subordination. Developed in American jurisprudence, the doctrine permits the claims of one creditor to be subordinated to the claims of another or other creditors of equal rank if circumstances warrant, on the basis of the equitable jurisdiction of the court.

Fourth-time personal bankruptcies come along so rarely that they deserve special recognition. The Supreme Court of British Columbia was recently presented with one such instance when Mr. Thomas Boivin ("Boivin") applied for a discharge from his fourth bankruptcy.

Over the course of about thirty years, Boivin's use of credit left creditors with total debts of approximately $834,000.

While rarely done, section 197(3) of the Bankruptcy and Insolvency Act ( “BIA”) authorizes a court to hold a bankruptcy trustee personally liable for the costs of its conduct. The principles underlying section 197(3) were recently reviewed and discussed by one of the leading authorities on Canadian bankruptcy law, Morawetz J., in the Ontario Superior Court of Justice case of Greenstreet Management where the Court used its statutory discretion to award costs personally against a trustee.

A. The Restructuring Candidate

The Debtor’s Freeze: Protecting Your Client’s Assets

I. INTRODUCTION

A. Protecting Assets

Second and third time personal bankruptcies are uncommon, but fourth time bankruptcies are so rare they deserve recognition. The Supreme Court of British Columbia was recently presented with one such instance when Mr. Douglas Kusch applied for a discharge from his fourth bankruptcy.

On September 25, the UK Financial Services Authority (FSA) announced that two UK-based firms have been placed into liquidation by the UK High Court following the FSA’s intervention. The FSA believes that these scams may have fraudulently persuaded up to 800 people into buying worthless shares. Investors are believed to have lost up to £3.5 million ($7.5 million).

Chesteroak Limited and Bingen Investments Limited were shut down following allegations that they were dealing in or arranging deals in shares without proper authorization.

The District Court sustained claims of breach of fiduciary duty, fraud and deepening insolvency asserted by the successor-in-interest to the Committee of Unsecured Creditors of DVI, a defunct company, against DVI’s former officers and directors.