CLIENT PUBLICATION FINANCIAL RESTRUCTURING & INSOLVENCY | August 9, 2016 Not So Safe After All?

CLIENT PUBLICATION Financial Restructuring & Insolvency | August 9, 2016 Judge Chapman Flips the Script US Bankruptcy Court for the Southern District of NY Grants Noteholders’ Motion to Dismiss Based on Lehman’s Failure to State Claim With Respect to Flip-Clause Litigation On June 28, 2016, in what essentially was a clean sweep for the noteholder and trust certificate holder defendants (the “Noteholders”), the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) granted an omnibus motion to dismiss Lehman Brothers Special Financing, Inc.’s (“LBSF

This briefing is the second in a series of 3 briefings about the Third Parties (Rights Against Insurers) Act 2010 which we will be publishing on the run-up to it coming into force on 1 August 2016.

Click here if you would like to read the first briefing in the series.

The pros and cons every claims professional needs to know

This briefing is the first in a series of 3 briefings about the Third Parties (Rights Against Insurers) Act 2010 which we will be publishing over the next fortnight.

The pros and cons every claims professional needs to know – part 1

Brexit Overview

Legal implications of the UK withdrawal from the EU

There is no precedent for a member state leaving the EU and we can expect slow progress to be made in relation to our exit and the conclusion of alternative trade deals, with estimates for the timescale ranging from two to 10 years. However long it takes, we can be sure that complex negotiations will be required.

In a June 3, 2016 decision¹ , the United States Bankruptcy Court for the District of Delaware (“the Bankruptcy Court”) invalidated, on federal public policy grounds, a provision in the debtorLLC’s operating agreement that it viewed as hindering the LLC’s right to file for bankruptcy. Such provision provided that the consent of all members of the LLC, including a creditor holding a so-called “golden share” received pursuant to a forbearance agreement, was required for the debtor to commence a voluntary bankruptcy case.

English insolvency and restructuring law and procedures are significant at both the European and world level. In recent times lenders, debtors and many others have sought to take advantage of the varied, flexible and fair procedures available in our jurisdiction.

In its recently issued decision in Husky International Electronics, Inc. v. Ritz, a 7-1 majority of the Supreme Court has clarified that intentionally fraudulent transfers designed to hinder or defraud creditors can fall within the definition of “actual fraud” under Section 523(a)(2)(A) of the Bankruptcy Code and can sometimes result in corresponding liabilities being non-dischargeable in a personal bankruptcy proceeding.¹

Introduction

In the first 3 months of this year, company insolvencies increased for the first time since 2014. In April, UK manufacturing activity contracted for the first time in 3 years.1 A range of explanations has been offered including

weaker domestic demand, low oil prices hitting production and uncertainty created by the EU referendum. It the circumstances, it seems timely to look at one of the remedies that can be available to manufacturers and suppliers in the event of a customer failing to pay for goods.

In a March 29, 2016 decision,1 the United States Court of Appeals for the Second Circuit (the "Court of Appeals") held that creditors are preempted from asserting state law constructive fraudulent conveyance claims by virtue of the Bankruptcy Code's "safe harbors" that, among other things, exempt transfers made in connection with a contract for the purchase, sale or loan of a security (here, in the context of a leveraged buyout ("LBO")), from being clawed back into the bankruptcy estate for distribution to creditors.