On 8 October 2013, the Supreme Court of Vietnam released the most recent draft of the new Law on Bankruptcy ("Draft Bankruptcy Law"). The Draft Bankruptcy Law is now open for comments and, once passed by the National Assembly, will replace the current Law on Bankruptcy 2004 ("Current Bankruptcy Law").

The Draft Bankruptcy Law appears generally to be a positive step in Vietnam's efforts to improve the efficiency of the bankruptcy process and efforts to enhance the credibility of the legal framework for restructuring.

Conduct of Bankruptcy Proceedings

Section 546(e) of the Bankruptcy Code offers a strong defense for holders of bonds, notes and other securities to preference and fraudulent transfer actions brought in bankruptcy proceedings. Essentially, any payment made to settle or complete a securities transaction, including repurchases and redemptions of bonds, notes and debentures, is protected from avoidance under the Bankruptcy Code. For many years, however, this powerful defense was rarely used. When the defense was raised, it was usually in the context of protecting payments made in leveraged buy-outs.

Note: This post is part of a four-part series on the Credit Report Blog. Click here to view all related posts.

In a much-awaited judgment, the UK Supreme Court has decided that the liability of a company in administration or liquidation to contribute to an under-funded pension fund following a Financial Support Direction or a Contribution Notice is a provable debt ranking equally with other unsecured creditors. Crucially, it is not an expense of the administration or liquidation which would cause it to rank ahead of all creditors (except fixed charge holders) and even the administrator's or liquidator's own remuneration.

The United States District Court for the Middle District of Pennsylvania has held that an E&O policy issued to a now-bankrupt credit counseling company did not cover claims arising under unfair trade practices statutes, but did cover claims arising under fair debt collection statutes. Hrobuchak v. Fed. Ins. Co., 2013 WL 2291875 (M.D. Pa. May 24, 2013). The court also held that carve-outs from the policy’s definition of loss did not preclude coverage for statutory damages or damages representing the return of fees paid to the insured.

Introduction

Judge James M. Peck of the Bankruptcy Court for the Southern District of New York held, on June 25, 2013 (the “Lehman Op.”),1that claims under repurchase transactions (“Repos”) do not qualify as customer claims and therefore are not entitled to the priority or coverage provided for customers’ claims under the Securities Investor Protection Act (“SIPA”).

On June 10th, the FDIC published the final rule establishing the criteria for determining if a company is predominantly engaged in "activities that are financial in nature or incidental thereto" for purposes of Title II of the Dodd-Frank Act and therefore subject to the FDIC's orderly liquidation authority.

In many Chapter 11 business bank - ruptcies, the office of the U.S. Trustee (the “UST”) will appoint a representative body of unsecured creditors (the “Com mittee”) to represent the interests of all unsecured creditors. The Committee is selected from unsecured creditors of the debtor who generally hold the largest unsecured claims against the debtor, are not “insiders” of the debtor and are willing to serve. A potential Committee member’s willingness to serve is demon strated through returning the creditor questionnaire to the UST and/or attending the formation meeting when scheduled.