Europe has struggled mightily during the last several years to triage a long series of critical blows to the economies of the 28 countries that comprise the European Union, as well as the collective viability of eurozone economies. Here we provide a snapshot of some recent developments regarding insolvency, restructuring, and related issues in the EU. 

InGrayson Consulting, Inc. v. Wachovia Securities, LLC (In re Derivium Capital LLC), 716 F.3d 355 (4th Cir. 2013), the U.S. Court of Appeals for the Fourth Circuit examined whether certain securities transferred and payments made during the course of a Ponzi scheme could be avoided as fraudulent transfers under sections 544 and 548 of the Bankruptcy Code. The court upheld a judgment denying avoidance of pre-bankruptcy transfers of securities because the debtor did not have an “interest” in the securities at the time of the transfers.

“Safe harbors” in the Bankruptcy Code designed to minimize “systemic risk”—disruption in the securities and commodities markets that could otherwise be caused by a counterparty’s bankruptcy filing—have been the focus of a considerable amount of judicial scrutiny in recent years. The latest contribution to this growing body of sometimes controversial jurisprudence was recently handed down by the U.S. Court of Appeals for the Second Circuit.

Recent Developments

Europe has struggled mightily during the last several years to triage a long series of critical blows to the economies of the 27 countries that comprise the European Union as well as the collective viability of euro-zone economies. Here we provide a snapshot of some recent developments relating to insolvency and restructuring in the EU.

Judge Robert W. Sweet of the U.S. District Court for the Southern District of New York held inCT Investment v. Carbonell and Grupo Costamex, 2012 WL 92359 (S.D.N.Y. Jan. 11, 2012), that comity should be extended to an order issued by a Mexican district court overseeing the Mexican bankruptcy proceeding (concurso mercantil) of Cozumel Caribe S.A. de C.V. (“Cozumel Caribe”) under Mexico’s Ley de Concursos Mercantiles (the “Mexican Business Bankruptcy Act”). In so holding, Judge Sweet stayed the U.S.

Two fundamental goals of chapter 11 of the Bankruptcy Code are rehabilitating a debtor’s business and maximizing the value of the debtor’s estate for the benefit of various stakeholders.

Much attention in the commercial bankruptcy world has been devoted recently to judicial pronouncements concerning whether the practice of senior creditor class “gifting” to junior classes under a chapter 1 1 plan violates the Bankruptcy Code’s “absolute priority rule.” Comparatively little scrutiny, by contrast, has been directed toward significant developments in ongoing controversies in the courts regarding the absolute priority rule outside the realm of senior class gifting— namely, in connection with the “new value” exception to the rule and whether the rule was written out of the Bankr

A decision recently handed down by the Delaware Chancery Court, CML V, LLC v. Bax, indicates that creditors of a limited liability company (“LLC”) organized under Delaware law do not have standing to institute derivative suits against an LLC’s management, even when the LLC is insolvent, unless the right is expressly set forth in the LLC’s organizational documents or external agreements.

Background

As attention shifts from the global financial crisis of 2008–2009 to the global sovereign crisis that currently is affecting much of Europe, lawmakers are scrambling to create new laws and regulations designed to stave off the next financial crisis.[1] Meanwhile, a different threat quietly has been growing in America's states, cities, towns, municipalities, and other political subdivisions.