Lessor of Equipment and Licensor of Intellectual Property In re Edscha North America, Inc. (Bankr. N.D. Ill.) Case no. 09-39055
Publishing Company in Pleasantville, New York In re Reader’s Digest Sales and Services, Inc. (Bankr. S.D.N.Y.) Case no. 09-09548
470-Unit Apartment Complex in Pittsburgh, Pennsylvania In re Ventana Hills Associates, Ltd. (Bankr. N.D. Ill.) Case no. 09-41755 In re Ventana Hills Phase II, L.P. (Bankr. N.D. Ill.) Case no. 09-41758
470-Unit Apartment Complex in Pittsburgh, Pennsylvania In re Ventana Hills Associates, Ltd. (Bankr. N.D. Ill.) Case no. 09-41755 In re Ventana Hills Phase II, L.P. (Bankr. N.D. Ill.) Case no. 09-41758
One of your customers owes you money but is in financial trouble. The customer promises to pay you next week or next month or after a big receivable comes in.
The Eleventh Circuit Court of Appeals has just issued an opinion that should concern anyone doing business with a debtor in bankruptcy. In short, the court ruled that a company that supplied $1.9 million worth of goods to a debtor after the petition date had to return the debtor's payment. The reason? The debtor did not have permission from the court or its secured creditor to use the money. The payments were for value given post-petition and were apparently made in accordance with the pre-petition practice between the parties.
Factoring is one of the oldest forms of financing and is still relevant to almost all businesses across the globe.
It is a financing arrangement that enables a business to sell its account receivables (ie. outstanding monies owed to that business) to third parties at a discounted price. These third parties are typically banks or financial institutions, also known as factors. A company would agree to sell and assign its receivables to the factor, prior to their due date, at an agreed discounted rate. The discount accounts for the risk of non-payment.
Most lawyers are generally familiar with the concept of a floating lien under the Uniform Commercial Code. A secured creditor takes a lien in a collateral category that changes from time to time as items are added or subtracted. A common example is a working capital loan, in which financed inventory is produced and sold, then becoming an account, which is collected to provide the funds to produce new inventory. A secured creditor may perfect a lien in the changing mass of inventory and receivables, as each category exists from time to time.
The Company Court of Alicante, Nº 1, made, in its judgment dated July 20th, 2012, a useful analysis on the different decisions part of the case law in regards to the recognition of pledgesof future receivables and their classification as privileged credit in cases of bankruptcy proceedings, being a very commonly practiced consideration.
Poland’s Supreme Court in a recent ruling found a grant of security for parallel debt to be invalid.