On October 4, 2011, the United States Bankruptcy Court for the Southern District of New York ruled that a contractual right of a triangular (non-mutual) setoff was unenforceable in bankruptcy, even though the contract was safe harbored. In re Lehman Brothers, Inc., No. 08-01420 (JMP), 2011 WL 4553015 (Bankr. S.D.N.Y. Oct. 4, 2011).
On July 22, 2011, Bankruptcy Judge Craig A.
Introduction
Background
The concept of cell companies was first introduced to Jersey in February 2006. In addition to the widely recognised structure of a protected cell company, Jersey also introduced a completely new concept - the incorporated cell company.
The key issue which differentiates both types of cell company from traditional (non-cellular) companies is that they provide a flexible corporate vehicle within which assets and liabilities can be ring-fenced, or segregated, so as only to be available to the creditors and shareholders of each particular cell.
On June 23, 2011, the Supreme Court ruled 5-4, in an opinion by Chief Justice Roberts, that a Bankruptcy Judge lacked constitutional authority to issue a final ruling on state law counterclaims by a debtor against a claimant. This is the latest round of a well-known case involving the estate of former model Anna Nicole Smith and the estate of her late husband, wealthy oil magnate J. Howard Marshall.
On 28 March 2011 the Social Security Department issued guidance for Insolvency Practitioners on the Temporary Insolvency Scheme. The Temporary Insolvency Scheme was set up in 2009, in the wake of well-publicised insolvencies such as that of Woolworths Plc.
The guidance states:
Earlier this year, the U.S. Court of Appeals for the Second Circuit held that a proposed “gifting” plan distributing value from the second lien lenders to the prepetition equity holder violated the absolute priority rule and was confirmed in error.2 This decision, by a 2-1 panel vote,3 reversed the decisions of the Bankruptcy and District Courts for the Southern District of New York. The Second Circuit also affirmed unanimously the designation of the vote of an indirect competitor of the debtor that held no claims prior to the petition date.
The United States Bankruptcy Court for the District of Delaware recently dismissed equitable subordination and fraudulent transfer claims filed by the Official Committee of Unsecured Creditors of Champion Enterprises, Inc.
In two recent decisions, the United States Bankruptcy Court for the Southern District of New York has interpreted narrowly certain of the Bankruptcy Code’s safe harbor provisions.
The liquidity crisis has increased the need for creative procedures to avoid sudden death bankruptcy in order to salvage existing value.
A Jersey company or a company incorporated elsewhere but administered in Jersey may become involved in insolvency procedures under Jersey law or the law of a jurisdiction outside Jersey.