Fulltext Search
Unauthorized transfer and deed of trust in LLC property is void, lender loses its security

A theme running through many apparent-authority cases is the question of who loses: for example, the LLC whose property was used to secure unauthorized, personal borrowings by a member or manager, or the bank that in good faith made the loan to the malefactor? Often the recipient of the funds has used the money for personal matters and is essentially judgment proof.

USA, Mississippi, Banking, Insolvency & Restructuring, Litigation, Real Estate, Stoel Rives LLP, Bankruptcy, Debtor, Limited liability company, Deed, Good faith, Conveyancing, Deed of trust (real estate), United States bankruptcy court, Fifth Circuit
Bankruptcy panel enforces LLC agreement's prohibition on bankruptcy filing

A Bankruptcy Appellate Panel (BAP) of the Tenth Circuit recently upheld a bankruptcy court’s dismissal of an LLC’s Chapter 11 bankruptcy petition on the ground that the LLC’s operating agreement barred the LLC from filing for bankruptcy. DB Capital Holdings, LLC v. Aspen HH Ventures, LLC (In re DB Capital Holdings, LLC), No. CO-10-046, 2010 Bankr. LEXIS 4176 (B.A.P. 10th Cir., Dec. 6, 2010).

USA, Company & Commercial, Insolvency & Restructuring, Litigation, Stoel Rives LLP, Bankruptcy, Debtor, Limited liability company, Standing (law), Coercion, United States bankruptcy court, Bankruptcy Appellate Panel, Tenth Circuit
Delaware court interprets LLC Act to bar derivative suit by creditor of insolvent LLC

The Delaware Court of Chancery decided earlier this month that a creditor of an insolvent LLC does not have standing to maintain a derivative suit in the name of the LLC against its managers. CML V, LLC v. Bax, No. 5373-VCL, 2010 Del. Ch. LEXIS 220 (Del. Ch. Nov. 3, 2010).

USA, Delaware, Insolvency & Restructuring, Litigation, Stoel Rives LLP, Shareholder, Fiduciary, Interest, Limited liability company, Standing (law), Derivative suit, Delaware General Corporation Law, Court of Chancery, Delaware Court of Chancery, Delaware Supreme Court
Appointment of receiver upheld for Delaware LLC

The appointment of a receiver is one of the oldest equitable remedies. A receiver can receive, preserve, and manage property and funds, and even take charge of an operating business, as directed by the court. Appointing a receiver is a powerful remedy, not undertaken lightly by the courts.

USA, Delaware, Company & Commercial, Insolvency & Restructuring, Litigation, Stoel Rives LLP, Breach of contract, Fraud, Fiduciary, Limited liability company, Tortious interference, Delaware General Corporation Law, Delaware Court of Chancery, Delaware Supreme Court, Court of equity
Washington LLC member knowingly receives unlawful distribution - what's the remedy?

The Washington LLC Act prohibits an insolvent LLC from making a distribution to a member. RCW 25.15.235(1). Either type of insolvency will do – the LLC is unable to pay its debts as they come due in the usual course of business, or the LLC’s liabilities exceed the fair value of its assets.

USA, Washington, Insolvency & Restructuring, Litigation, Stoel Rives LLP, Shareholder, Limited liability company, Debt, Liability (financial accounting), Washington Court of Appeals
Time is running out to defer income recognition from debt-equity exchanges

Restructures of financially distressed firms often involve debt-equity exchanges. The concept is straightforward: the company issues equity to its lenders in exchange for their cancellation of some of the company’s debt. The company’s debt burden and interest payment expenses are reduced and its balance sheet is strengthened.

USA, Insolvency & Restructuring, Tax, Stoel Rives LLP, Debtor, Security (finance), Interest, Limited liability company, Debt, Liquidation, Balance sheet, Election, Distressed securities, Internal Revenue Code (USA)
LLC's creditors have standing to sue members for unlawful distributions

The Colorado Court of Appeals held last month that creditors as a group have standing to sue members of an LLC who receive distributions knowing that the distributions were made when the LLC was insolvent. Colborne Corp. v. Weinstein, No. 09CA0724, 2010 Colo. App. LEXIS 58 (Colo. App. Jan. 21, 2010).

USA, Colorado, Insolvency & Restructuring, Litigation, Stoel Rives LLP, Fiduciary, Limited liability company, Standing (law), Colorado Court of Appeals