In a pro-debtor opinion released on February 26, 2013, the Fifth Circuit Court of Appeals held that a debtor may “artificial impair” claims in a class to obtain an impaired and accepting class of claims as required by section 1129(a)(10) of the Bankruptcy Code. Western Real Estate Equities, L.L.C. v. Village at Camp Bowie I, L.P. (In re Village at Camp Bowie I, L.P.), No. 12-10271, 2013 WL 690497 (5th Cir. Feb. 26, 2013).

Statutory Background to the Artificial Impairment Issue

A recent decision in the protracted litigation by lenders of Extended Stay to recover under guaranties executed by owners of Extended Stay highlights the need for clear and unambiguous drafting in intercreditor agreements.

Most people think of an oil and gas mineral “lease” as, so named, a lease. However, this common thinking is not necessarily accurate, both with respect to state and federal law and in particular in the bankruptcy courts in the United States.

In an important opinion released on November 27, 2012, Judge Shelley C. Chapman of the United States Bankruptcy Court for the Southern District of New York transferred the Patriot Coal Corporation (Patriot Coal) chapter 11 bankruptcy cases from the Southern District of New York to the Eastern District of Missouri. This decision comes as a surprise to many observers who had expected, based on prior failed attempts to change venue in Enron and other large cases filed in the Southern District of New York, that Judge Chapman would defer to the Debtor’s choice of venue.

Following the entry into force of the Act to Modernise the Law Governing Private Limited Companies and to Combat Abuses (MoMiG), an atypical silent shareholder must still be treated as a subordinate insolvency creditor for the purposes of section 39(1) no. 5 of the Insolvency Act (InsO) in the event that the company becomes insolvent, assuming the status of the silent shareholder is similar to that of a shareholder in a GmbH (private limited company).

In four judgments of 26 June 2012, case refs.: XI ZR 259 / 11, XI ZR 316 / 11, XI ZR 355 / 10 and XI ZR 356 / 10, the Federal Court of Justice (BGH) has again stated its position on the question of when there is a duty to disclose commission. In all four cases the investors purchased certificates from the same defendant bank to invest different amounts and these certificates turned out to be largely worthless following the insolvency of the issuer (Lehman Brothers Treasury Co. B.V.) and the guarantor (Lehman Brothers Holdings Inc.) in September 2008.

In two recent judgments, the Federal Court of Justice (BGH) dealt with the resistance to insolvency of the statutory claim for deletion of a land charge and the resistance to insolvency of the claim for restitution of higher or equal ranking land charges which has been assigned for security purposes. Abandoning its existing case law, the BGH answered the question of resistance to insolvency of the statutory claim for deletion from the register as per section 1179a of the German Civil Code in the affirmative in its judgment dated 27 April 2012 (BGH, judgment of 27.04.2012 – V ZR 270 / 10).

The IRS and Treasury recently proposed regulations that, if finalized, would permit an employer in bankruptcy to amend its defined benefit plan to eliminate certain optional forms of benefit, including lump sum payments.

Now everything will be better! The new ESUG legislation which entered into force on 1 March 2012 has generated huge expectations. The somewhat unwieldy title of “Law for the Further Facilitation of the Restructuring of Businesses” covers a raft of significant changes to the Insolvency Act and existing restructuring regulations. Its objectives are ambitious. The ESUG is intended to make business restructuring easier, more effective and faster – thus a press release from the Federal Ministry of Justice dated 23 February 2012.

In insolvency proceedings, claims for repayment of shareholder loans – particularly if granted to a company limited by shares or a limited commercial partnership – are generally subordinate. In its judgment of 15 November 2011 (II ZR 6/11), the Federal Court of Justice (Bundesgerichtshof, BGH) addressed whether and for what period this also applied to corresponding claims by former shareholders.