The U.S. Court of Appeals for the Fifth Circuit recently held that a Creditor Exclusion provision in D&O insurance coverage may result in significant limitations on the coverage provided to the D&Os, when the underlying dispute is with a creditor in its capacity as such.

A recent Delaware bankruptcy court decision may potentially place at risk an equity sponsor’s ability to retain proceeds from the sale of a portfolio company whose performance later deteriorates, where the selling sponsor acted in bad faith and the portfolio company was or became insolvent at the time of or on account of the sale.

Circuit Break? Delaware Bankruptcy Court Rejects Second Circuit Ruling on State Law Fraudulent Transfers

The perils of making a declaration of solvency by company directors, without reasonable grounds.

Summary

On 25 July 2016, Insurance Ireland published a statement opposing the Department of Finance's recent recommendation that liabilities of any insolvent motor insurer should be assumed by the Insurance Compensation Fund. Insurance Ireland states this would and pose a systemic risk to the Irish motor insurance market.

In FTI Consulting, Inc. v. Merit Management Group, LP,¹ the Seventh Circuit recently held that transfers are not protected under the safe harbor of section 546(e) of the U.S.

In a recent decision by the U.S. Court of Appeals for the Second Circuit in the General Motors case, the court held certain claimants were not afforded procedural due process with respect to the § 363 sale of General Motor Corporation’s assets in the bankruptcy case. As a result, the assets were not sold free and clear of these claims, and these claimants may now seek recovery against New GM.

The Office of the Director of Corporate Enforcement (ODCE) has published its Annual Report for 2015.

Key Developments from the Report: 

Private equity sponsors should be aware of two recent court decisions. One involves fiduciary duties under state law that may be owing to a limited liability company borrower by its managers, in the context of receivables financing facilities or other asset-based lending transactions involving the use of special-purpose vehicles. The other involves certain implications of governing-law choices under acquisition financing and related agreements.

Pottawattamie: Maybe Not So Special (Purpose) After All

This case¹ concerned a challenge to a High Court judgment which was entered against Mr Hanley for failure to repay monies borrowed pursuant to a loan agreement. Mr Hanley asserted that he had never received a letter of demand for repayment of the loan monies borrowed. The Court noted that the notice of demand went, in error, to another Mr Hanley that had no connection to the Defendant.

In a 5-2 decision, the Supreme Court of the United States in Commonwealth of Puerto Rico et al. v. Franklin California Tax-Free Trust et al., 579 U.S. ___ (2016), rejected the Puerto Rico Public Corporation Debt Enforcement and Recovery Act (the “Recovery Act”) as preempted by the Bankruptcy Code on June 13, 2016. The practical implication of the decision is that Puerto Rico is currently without options to restructure its billions of dollars in municipal debt, and the only feasible path forward will most likely have to come from Congress.