The Commodity Futures Trading Commission has amended its bankruptcy rules (17 C.F.R. Part 190) to create a new “account class” for cleared over-the-counter (OTC) derivatives for purposes of calculating customer “net equity” and “allowed net equity” in the event of the bankruptcy of a futures commission merchant.

On March 22, the United States Court of Appeals for the Third Circuit issued a decision that could significantly impact the rights of secured creditors to credit bid in connection with Chapter 11 asset sales under a plan of reorganization.

Lehman Brothers Holdings Inc. (LBHI) and its affiliated U.S. chapter 11 debtors (the “Debtors”) filed a joint plan with the Bankruptcy Court on March 15, the last day on which the Debtors who filed petitions on September 15, 2008, had the exclusive right to file a plan. As a result of the filing, the Debtors have an additional 60 days during which no other party may file a plan.

A recent court ruling by U.S. Bankruptcy Judge Burton Lifland clarifies the process for determining how much money investors may be entitled to receive in connection with the Securities Investor Protection Corporation (SIPC) proceeding involving the Madoff Ponzi scheme. The new ruling specifically related to whether investors could receive amounts equaling the totals appearing on their last account statements. The judge sided with the SIPC-appointed trustee, Irving Picard, who argued that investors could claim only the amount they first invested with Madoff (minus any withdrawals).

Beneficiaries of a Ponzi scheme who were subsequently found liable to cheated investors under state securities laws could not discharge this liability under Chapter 7 of the Bankruptcy Code, the U.S. District Court for the Western District of Oklahoma ruled.

The Dáil Public Accounts Committee has issued a report which primarily examined the loss of "Fiduciary" taxes (such as PRSI and PAYE) arising from company insolvency. The Committee concluded that there is a need in Ireland to introduce further measures to reduce the amount of Fiduciary taxes that are lost due to the irresponsible behaviour of directors. There is a need, according to the report, for the introduction of a deterrent which will make directors aware of the negative consequences which could arise for them if they wilfully evade paying the company taxes that are due.

The U.S. Bankruptcy Court for the Southern District of Texas issued a stern warning to professional services providers regarding “tail fees,” establishing a presumption of unreasonableness against contract terms requiring fees not attached to tangible, identifiable and material benefits to the debtor’s estate.

On January 25, Judge Peck of the U.S. Bankruptcy Court for the Southern District of New York entered a declaratory judgment in favor of Lehman Brothers Special Financing Inc. (LBSF) in a case examining a collateralized debt obligation (CDO) transaction and concerning the effect of event of default provisions on the payment priorities of LBSF as swap counterparty under certain swap agreements and the holders of certain credit-linked synthetic portfolio notes. The payment waterfalls (Priority Provisions) of most CDO transactions give priority to swap counterparties over noteholders.

The Commodity Futures Trading Commission is proposing to amend its Bankruptcy Rules to permit the trustee for a bankrupt futures commission merchant to continue to operate the business of the commodity broker in the ordinary course for a limited period of time.

Last week the Supreme Court overturned Mr Justice McGovern's recent decision in the Linen Supply of Ireland examinership that the current legislation does not permit the repudiation of leases in an examinership. The case has now been remitted back to the High Court to consider whether, in the specific case before it, the leases ought to be repudiated in order for a scheme of arrangement to be formulated.