Tax authorities have perceived recently that international corporate groups are going through internal business restructurings in large part or in whole to achieve income tax savings.
The German Government has introduced a reform of the German Insolvency Code (Insolvenzordnung– InsO) in order to further facilitate business restructurings in Germany.
In Germany, the restructuring of companies or groups in financial crisis is subject to significant tax risks.
In the European Union, Stat e interventions in the market in the form of subsidies or other economic advantages are generally prohibited, but companies can receive aid from Member States if the aid is approved by the European Commission.
With the flood of debt-heavy capital structures created over the past decade, bankruptcy courts have been left to clean up the remnants of many failed transactions. Given the volume of debt provided, courts are likely to continue to be called upon to determine the relative rights of creditors that result from multi-tiered debt structures.
Reversing both the bankruptcy court and the district court, the U.S. Court of Appeals for the Third Circuit held that a trademark licensing agreement had been substantially performed and was therefore not subject to rejection under §365(a) of the Bankruptcy Code. In re Exide Technologies, Case No. 08-1872 (3d Cir., June 1, 2010) (Roth, J.) (Ambro, J., concurring).
KEY POINTS
- A US Bankruptcy Court decision held that loans to a homebuilding company that subsequently filed for bankruptcy constituted a fraudulent transfer.
On October 29, 2009, the California Court of Appeal, Sixth District, in Berg & Berg Enterprises, LLC v. Boyle, et al., unequivocally ruled that, under California law, directors of either an insolvent corporation or a corporation in the more elusively defined “zone of insolvency” do not owe a fiduciary duty of care or loyalty to creditors. In so ruling, California joins Delaware in clarifying directors’ duties when the corporation is insolvent or in the zone of insolvency.
Background
The Eastern District of Pennsylvania held that secured creditors do not have a right to credit bid their claim when the sale of a debtor’s assets is conducted under a plan of reorganization.
The bankruptcy court's opinion exemplifies the second guessing that can confront solvency opinion providers and highlights issues that providers should carefully vet with experienced legal counsel.