A “structured dismissal” of a chapter 11 case following a sale of substantially all of the debtor’s assets has become increasingly common as a way to minimize costs and maximize creditor recoveries. However, only a handful of rulings have been issued on the subject, perhaps because bankruptcy and appellate courts are unclear as to whether the Bankruptcy Code authorizes the remedy.
Europe has struggled 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.
In Short
The Situation: In February 2020, amendments to the Corporations Act 2001 (Cth) expanded the kinds of transactions that may be voidable if a company is being wound up to include asset disposals undertaken as part of illegal phoenixing schemes. Such disposals are termed as "creditor-defeating dispositions" in the legislation.
Despite the absence of any explicit directive in the Bankruptcy Code, it is well understood that a debtor must file a chapter 11 petition in good faith. The bankruptcy court can dismiss a bad faith filing "for cause," which has commonly been found to exist in cases where the debtor seeks chapter 11 protection as a tactic to gain an advantage in pending litigation. A ruling recently handed down by the U.S.
In Stream TV Networks, Inc. v. SeeCubic, Inc., 2020 WL 7230419 (Del. Ch. Dec. 8, 2020), the Delaware Court of Chancery held that the assets of Stream TV Networks, Inc. ("Stream"), an insolvent Delaware-incorporated 3-D television technology company, could be transferred to an affiliate of two of Stream's secured creditors in lieu of foreclosure without seeking the approval of Stream's shareholders under section 271 of the General Corporation Law of Delaware ("DGCL") or Stream's certificate of incorporation.
The ability of a bankruptcy trustee to avoid certain transfers of a debtor's property and to recover the property or its value from the transferees is an essential tool in maximizing the value of a bankruptcy estate for the benefit of all stakeholders. However, a ruling recently handed down by the U.S. Court of Appeals for the Tenth Circuit could, if followed by other courts, curtail a trustee's avoidance and recovery powers. In Rajala v. Spencer Fane LLP (In re Generation Resources Holding Co.), 964 F.3d 958 (10th Cir. 2020), reh'g denied, No.
Appointment of PROMESA Financial Oversight Board Was Constitutional
To encourage creditors, equity interest holders, indenture trustees and unofficial committees to take actions that benefit a bankruptcy estate, section 503(b)(3)(D) of the Bankruptcy Code confers administrative priority on their claims for expenses incurred in making a "substantial contribution" in a chapter 9 or chapter 11 case. Administrative expense status is also given under section 503(b)(4) to their claims for reimbursement of reasonable professional fees incurred in making a substantial contribution. The U.S.
In In re Tribune Co. Fraudulent Conveyance Litig., 2019 WL 1771786 (S.D.N.Y. Apr. 23, 2019), the U.S. District Court for the Southern District of New York denied a litigation trustee’s motion to amend a complaint seeking to avoid alleged fraudulent transfers made to selling shareholders as part of a 2007 leveraged buyout ("LBO") of the Tribune Co. ("Tribune"), ruling that the safe harbor in section 546(e) of the Bankruptcy Code continues to bar such claims notwithstanding the U.S. Supreme Court’s February 2018 decision in Merit Management Group v. FTI Consulting.
On September 21, 2018, the U.S. District Court for the District of Delaware affirmed a bankruptcy court's ruling that it had the constitutional authority to grant nonconsensual third-party releases in an order confirming the chapter 11 plan of laboratory testing company Millennium Lab Holdings II, LLC ("Millennium"). SeeOpt-Out Lenders v. Millennium Lab Holdings II, LLC (In re Millennium Lab Holdings II, LLC), 2018 WL 4521941 (D. Del. Sept. 21, 2018).