Plaintiff, the trustee of the Chapter 7 estate of Security Asset Capital Corporation (SACC), a corporate debtor, brought an action against the debtor’s officers and directors, alleging that they breached their fiduciary duties by failing to commence Chapter 7 liquidation once SACC became insolvent.

With the possibility of a major stock brokerage liquidation appearing more likely than it has been in recent periods, the effect of a liquidation on customers and financial counterparties has become of great interest to many of our clients and others.

On September 25, the UK Financial Services Authority (FSA) announced that two UK-based firms have been placed into liquidation by the UK High Court following the FSA’s intervention. The FSA believes that these scams may have fraudulently persuaded up to 800 people into buying worthless shares. Investors are believed to have lost up to £3.5 million ($7.5 million).

Chesteroak Limited and Bingen Investments Limited were shut down following allegations that they were dealing in or arranging deals in shares without proper authorization.

In a decision handed down on February 23, the High Court granted a winding-up petition brought by the Financial Services Authority under section 367 of the Financial Services and Markets Act 2000 (FSMA).

Title II of the Act, designated "Orderly Liquidation Authority" – effective July 21, 2010 – establishes what is intended to be an orderly liquidation process for "financial companies" whose collapse or potential collapse are determined to constitute a risk to the financial system as a whole. Such systemically significant institutions would be liquidated under these new procedures, rather than being treated under existing bankruptcy laws. (The intent of Act is that most-failing financial companies will continue to be administered under existing bankruptcy laws.)

The U.S. Court of Appeals for the Third Circuit, in In re Philadelphia Newspapers LLC,1 has ruled that secured creditors do not have a right, as a matter of law, to credit bid their claims when their collateral is sold under a plan of reorganization. The Third Circuit held that secured creditors may be barred from credit bidding where a debtor's reorganization plan provides secured creditors with the "indubitable equivalent" of their secured interest in the assets. The court's ruling follows a similar ruling last year by the U.S.

On February 23, 2009, Pennsylvania became the second state to recognize an "ordinary course of business" exception to preference actions brought under a state insolvency statute where the defense is not expressly provided for in the statute. In Joel S. Ario, Insurance Commissioner of the Commonwealth of Pennsylvania, in His Official Capacity as Liquidator of Reliance Insurance Company, Appellant v. H.J. Heinz Company, H.J. Heinz Company, L.P., H.J. Heinz Finance Company, and Portion Pac, Inc., et al., Appellees, No. 21 MAP 2006 (Pa. Feb.

Introduction

In its recent decision in Pars Ram Brothers (Pte) Ltd (in creditors’ voluntary liquidation) v Australian & New Zealand Banking Group Ltd and others [2017] SGHC 38, the Singapore High Court held that the security interests of lenders survived the commingling of assets, and that the assets should be divided among the secured lenders in proportion to their respective contributions.

Facts

Selvam LLC, the Singapore Law Practice of Duane Morris & Selvam LLP, recently succeeded in securing the dismissal of a suit brought by a liquidator in the High Court of Singapore against a defendant director in Prima Bulkship Pte Ltd (In Creditors’ Voluntary Liquidation) and Another v Lim Say Wan And Another [2016] SGHC 283.