Over the years, the United States Supreme Court has had to interpret ambiguous, imprecise, and otherwise puzzling language in the Bankruptcy Code, including the phrases “claim,” “interest in property,” “ordinary course of business,” “applicable nonbankruptcy law,” “allowed secured claim,” “willful and malicious injury,” “on account of,” “value, as of the effective date of the plan,” “projected disposable income,” “defalcation,” and “retirement funds.” The interpretive principles employed by the Court in interpreting the peculiarities of the Bankruptcy Code were in full view when the Court r
What is a proprietary claim? A proprietary claim is a claim to own a specific asset or sum of money.
The English High Court in Fondazione Enasarco v Lehman Brothers Finance S.A. and Anthracite Rated Investments (Cayman) Limited [2015] EWHC 1307 (Ch) applied a common sense approach in the circumstances to the determination of Loss under the 1992 ISDA Master Agreement. The judgment of the judge (Mr Justice David Richards) is useful reading for those involved in structured products and derivatives.
Background
Introduction
Companies are habitually used as part of a corruption scheme. Such companies often have only a single director, or a small number of directors, and are beneficially owned by the wrong-doers.
Insolvency powers can be effective tools to obtain compensation for victims of fraud or corruption, in the right circumstances.
A state could, for example, apply to Court for a liquidator to be appointed over a company used for corruption.
When an insolvent entity files for bankruptcy, it can be tough to be a creditor. But holding equity — stock in a corporation or a membership interest in an LLC, a limited liability company — can be even worse. Under bankruptcy’s “absolute priority rule,” creditors generally must be paid in full before equity gets anything. That usually means that holders of equity, or claims treated as equity, get nothing.
A recent decision by the Bankruptcy Court for the Southern District of New York may enhance the ability of bankruptcy trustees and creditors committees to challenge allegedly fraudulent transfers that could qualify for protection under the “safe harbor” of section 546(e) of the Bankruptcy Code.
Risky Business. When a debtor is a licensee under a trademark license agreement, does it risk losing those license rights when it files bankruptcy? The question had not been answered in a Delaware bankruptcy case until Judge Kevin Gross recently addressed it in the In re Trump Entertainment Resorts, Inc. Chapter 11 case. A lot was riding on the decision, not just for the parties involved but, given how many Chapter 11 cases are filed in Delaware, more generally for other trademark licensees and owners as well.
Winding Down. If a corporation’s board of directors decides that the business needs to be wound down, there are a number of legal paths to consider. Determining the best approach is fact-dependent, and the corporation and its board should get legal advice before making a decision.
Under section 550(a) of the Bankruptcy Code, a trustee or debtor in possession may recover property (or its value) that has been fraudulently transferred “from the initial transferee or the entity for whose benefit the avoided transfer was made.” While the trustee’s right to recover from an initial transferee is absolute once a transfer is deemed fraudulent, a subsequent transferee may assert affirmative defenses that could prevent recovery by the estate of an otherwise avoidable transfer. As a result, defendants in fraudulent transfer litigations often take great pains to chara