BUSINESS RESTRUCTURING REVIEW VOL. 21 • NO. 5 SEPTEMBER–OCTOBER 2022 1 IN THIS ISSUE 1 Texas District Court: Bankruptcy Sale Break-Up Fee Satisfied Both Business Judgment Test and Administrative Expense Standard 2 Lawyer Spotlight: Gregory M.

The term “frenemy” – a combination of the words friend and enemy – has emerged from modern vernacular to describe someone who is simultaneously a partner and an adversary. The term is perhaps perfectly emblematic of the restructuring process where various constituents make and break alliances in an effort to steer the restructuring process. In so doing, the lines between friend and enemy are often blurred or altered during the course of the restructuring.

Seeking to have an independent examiner investigate a debtor or its management can be a powerful tool available to creditors and other interested parties in a bankruptcy case. Typically, a party might request that an examiner be appointed if the debtor or its management is suspected of fraud or other misconduct. The low cost associated with making the request, together with recent positive outcomes for requesting creditors, may help to increasingly popularize the use of examiner requests by parties seeking leverage in bankruptcy plan negotiations.

An opinion issued earlier this year by the Delaware Bankruptcy Court in In re SemCrude, L.P., et al. (Bankr. Del., No. 08-11525; January 9, 2009) may end much of the practice of so-called “triangular setoffs” by creditors in bankruptcy cases. The Court in SemCrude found that creditors violate section 553 of the Bankruptcy Code by setting off amounts among multiple debtors, even when exercising contractual assignment rights. This ruling is likely to have far-reaching impact given the dearth of case law on this fairly common contractual provision.

According to a recent decision from the Delaware Supreme Court, a secured party bears the burden of any mistakes in its security documents.  Official Comm. of Unsecured Creditors of Motors Liquidation Co. v. JPMorgan Chase Bank, N.A., No. 325, 2014 Del. LEXIS 491 (Del. Oct. 17, 2014) (“Del.

In 2007, the Delaware Supreme Court issued an important ruling for creditors of insolvent corporations. It held that such creditors had standing to assert derivative claims for breaches of fiduciary duties against directors of an insolvent corporation.1 But, as the Delaware Court of Chancery recently made clear, there is a big difference between Delaware limited liability companies (LLCs) and their corporate cousins.

In a significant Delaware law decision regarding creditors’ ability to sue corporate fiduciaries, the Delaware Supreme Court recently addressed the issue of whether a corporate director owes fiduciary duties to the creditors of a company that is insolvent or in the “zone of insolvency.” In North American Catholic Educ. Programming Found., Inc. v. Gheewalla, the court concluded that directors of a solvent Delaware corporation that is operating in the zone of insolvency owe their fiduciary duties to the corporation and its shareholders, and not creditors.

An opinion from the Second Circuit Court of Appeals in In re Motors Liquidation Company, relying on the Delaware Supreme Court’s answer to a certified question highlight the need to focus on the details w

In today’s turbulent economic climate, it is vital for creditors and debtors to understand the precise boundaries of their rights and duties when an enterprise becomes insolvent. Directors, officers and managers must acknowledge those to whom they owe fiduciary duties and fulfill those duties at the risk of personal liability, while creditors evaluate their potential remedies against misbehaving insiders to collect on defaulted obligations.

Directors and officers of Delaware corporations face no liability to corporate creditors from direct claims for breach of fiduciary duty, under the Delaware Supreme Court’s recent ruling in North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, (May 18, 2007) (“North American Catholic”).