Since April, two bankruptcy courts have refused to enforce limited liability company ("LLC") agreement provisions requiring the respective LLCs to obtain the unanimous consent of their members in order to seek bankruptcy relief.1 On June 3, 2016, the Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court") relied on federal public policy to invalidate an LLC agreement provision requiring unanimous member consent to file bankruptcy where the member at issue owed no fiduciary duties to the LLC and the member's primary relationship to the

Legislation and proposed legislation

Government consults on proposals for technology neutrality in the distribution of company meeting communications

The Government has proposed a technology neutral mode of distributing company meeting notices and materials which aims to facilitate innovation and reduce economic and time costs for companies, while maintaining an appropriate level of shareholder engagement.

Earlier this month, teen clothing retailer Aéropostale filed for Chapter 11 bankruptcy protection, seeking to immediately close 154 of its over 800 stores located throughout the United States and Canada. Many of these stores are located in smaller shopping malls, which have been hit the hardest by the shift to online shopping.

The continued march of retail bankruptcies since 2015 includes Sports Authority, Vestis Retail Group, Inc. (the operator of Sports Chalet, Eastern Mountain Sports, and Bob’s Stores), Radio Shack, American Apparel, Quicksilver, Wet Seal, Delia’s and PacSun.

The June 2013 issue of Baseload included the article “A $400 Million Devil in the Details: The Cautionary Tale of the Chesapeake Par Call.” We published an update to that article in the January 2015 issue. On July 10, 2015, the District Court for the Southern District of New York held that Chesapeake is required to pay the noteholders the make-whole amount.

If repayment of debt is accelerated as a result of bankruptcy, are debtholders eligible to receive a make-whole premium? The answer from an increasing number of courts is, without specific language in the indenture, no. Indentures usually include specific language to protect investors by declaring that upon certain designated “bankruptcy events,” all outstanding securities issued under that indenture become immediately due and payable (without further action from the holders of the securities).

Historically, investment grade debt with a make-whole provision was fairly straightforward. At any time during the life of the instrument, the issuer had the right to redeem the debt. But the price to be paid included the discounted value of the remaining payments of principal and interest over the life of the debt. Because the cost of paying the “make-whole” is often significant, issuers seldom redeem bonds when they are required to pay the make-whole price.

On May 4, 2015, the Supreme Court of the United States issued an opinion regarding a Chapter 13 bankruptcy case from the United States Court of Appeals for the First Circuit (the “First Circuit”).1 The question on appeal was whether debtor Louis Bullard (“Bullard”) could immediately appeal the bankruptcy court’s order denying confirmation of his proposed Chapter 13 payment plan (the “Plan”).2 The Court held that denial of confirmation of a debtor’s plan is not a final, appealable order.3  

Case Background

© 2015 Hunton & Williams LLP 1 May 2015 Oak Rock Financial District Court Addresses the Applicable Legal Standard for True Participation Agreements The United States District Court for the Eastern District of New York recently applied two tests, the True Participation Test and the Disguised Loan Test, to determine whether agreements were true participation agreements or disguised loans.1 In addition, the District Court noted that the most important question in such a determination is the risk of loss allocation in the transaction, and that if an alleged participant is not subject to the

In Quadrant Structured Products Company, Ltd. v. Vertin, the Delaware Court of Chancery made two key rulings concerning the rights of creditors to bring derivative lawsuits against corporate directors.¹  First,  the court held that there is no continuous insolvency requirement during the pendency of the lawsuit.

In this case, the High Court held that the proceeds of the sale of timber and land under a timber plantation scheme were not held on trust for investors by the scheme operators, with the result that they were available to secured creditors of the scheme in priority to the investors.  In particular, the High Court found that a trust will not arise without clear intention by the parties, and a court will not infer a trust simply because it thinks it is an appropriate means of protecting or creating an interest.  When establishing a managed investment scheme, parties shou