On January 21, 2015, the United States Court of Appeals for the Second Circuit entered an opinion holding that an authorized UCC-3 termination statement is effective, for purposes of Delaware’s Uniform Commercial Code (the “UCC”), to terminate the perfection of the underlying security interest even though the secured lender never intended to extinguish the security interest and mistakenly authorized the filing.1
Background
On October 17, 2014, the Delaware Supreme Court entered an opinion holding that a UCC-3 termination statement that is authorized by the secured party is effective to terminate the original UCC filing even though the secured party did not actually intend to extinguish the underlying security interest.1 Because the court determined that the relevant section of Delaware’s Uniform Commercial Code (the “UCC”) is unambiguous and
On October 16, 2014, the United States Court of Appeals for the Fifth Circuit entered an order requiring a real estate lender, First National Bank (the “Lender”), to refund certain mortgage payments it received from Protective Health Management (the “Debtor”), an affiliate of its borrower.1 Because the mortgage payments constituted actual fraudulent transfers, the Fifth Circuit held that the Lender could retain the payments only to the extent of the value of the Debtor’s continued use of the property.2&
Key Points:
There are three things prudent insolvency practitioners can do when left with non-company assets.
A not too infrequent issue for insolvency practitioners: what can you do with unclaimed assets of third parties? Clayton Utz recently acted for the receivers and managers of Arcabi Pty Ltd (In Liquidation) (Receivers and Managers Appointed) (known as “The Rare Coin Company”) and developed a strategy to deal with the issue.
Background
Key Points:
Courts will limit an administrator's liability where proposed funding is to be used directly to advance an agenda consistent with the objects of Part 5.3A of the Corporations Act.
A recent decision of the NSW Supreme Court highlights the flexibility of Part 5.3A of the Corporations Act and the ability of administrators to seek orders protecting their interests and facilitating restructures, and was the first stage of what promises to be a novel and challenging administration (In the matter of Nexus Energy Ltd [2014] NSWSC 1041).
Another bankruptcy court—this time in New York—has weighed in on the issue of whether “make whole” provisions are enforceable in bankruptcy. See In re MPM Silicones, LLC, et al. (a/k/a Momentive Performance Materials).
Key Points:
This case presented a difficult and unique set of circumstances for the court to navigate while the scheme clock was ticking.
The recent approval of the David Jones scheme of arrangement demonstrates how, in the absence of shareholder opposition, the inexorability of a scheme timetable can cause problems for a court when there is a major development after the first court hearing.
Key Points:
Courts will remove liquidators where there's apparent bias even where it might cause significant inconvenience and expense to the liquidation.
The Full Court of the Federal Court has found that a conflict of interest arose in circumstances where liquidators were required to investigate transactions with an entity that also refers work to the liquidators (ASIC v Franklin; Re Walton Construction Pty Ltd [2014] FCAFC 85).
As the wave of litigation spawned by the 2008 financial crisis begins to ebb, insurance-coverage litigation arising out of the credit crisis continues unabated. Financial institutions have successfully pursued insurance coverage for many credit-crisis claims under directors and officers (D&O) and errors and omissions (E&O) policies that they purchased to protect themselves against wrongful-act claims brought by their customers, but in response, some insurers continue to raise inapplicable exclusions in an attempt to diminish or limit coverage for their policyholders.
Key Points:
A forbearance arrangement is a useful instrument to ensure that both the lender and the customer are aligned on the proposed turnaround or workout.