This document discusses several ways in which corporate separateness can be blurred or exceptions applied in Chapter 11 bankruptcy cases, despite the general presumption of respecting separate corporate entities. It provides 4 key examples: 1) Courts disagree on whether Section 1129(a)(10) requires plan acceptance on a "per plan" or "per debtor" basis. 2) Bankruptcy-remote SPVs may not be bankruptcy proof. 3) Section 510(b)’s language on subordinated claims is ambiguous regarding which debtor entity a claim can be asserted against. 4) Multiple claims arising from the same transaction, such as guarantee claims, are generally allowed despite potential duplication. Overall, the document examines tensions between respecting corporate separat
This document analyzes the legal mechanisms that allow creditors to potentially receive a "double-dip" recovery in bankruptcy through asserting claims against both a guarantor entity and primary obligor entity for the same debt. It describes how a creditor can receive an allowed claim for the full amount owed against each debtor. It also explains how bankruptcy law treats intercompany claims and claims for reimbursement in a way that prevents offsetting of recoveries, allowing the creditor to potentially recover more than the amount owed from multiple entities. However, it notes there are risks like substantive consolidation that could eliminate this result.
The Bankruptcy Court ruled that certain secured obligations and associated liens incurred by Tousa and its subsidiaries to pay off a prior lender were avoidable as fraudulent conveyances. The District Court reversed this decision but the 11th Circuit Court of Appeals affirmed the Bankruptcy Court's original ruling, finding that the subsidiaries received no value from the payments and liens. The 11th Circuit held that the loan proceeds must be disgorged from the prior lender. This sets an important precedent that payments to creditors that simply delay bankruptcy without providing reasonably equivalent value can be considered fraudulent conveyances.
What do you understand about Bankruptcy Laws - David Ford Avon CTDavid Ford Avon Ct
This document provides information about various topics related to creditors' remedies and bankruptcy proceedings:
1. It defines different types of creditors' liens like mechanic's liens, artisan's liens, and innkeeper's liens. It also outlines prejudgment attachments and writs of execution that creditors can use.
2. It differentiates between suretyship, where a third party agrees to be liable for a debt, and guaranty arrangements.
3. It provides an overview of the typical steps in a bankruptcy proceeding and compares the different chapters available under the bankruptcy code.
Bankruptcy law in the_united_states_rulesRahul Mishra
Bankruptcy law in the United States allows individuals and organizations to legally deal with inability to pay debts. There are two main types of bankruptcy - voluntary, initiated by the debtor, and involuntary, initiated by creditors. The primary purposes of bankruptcy are to give honest debtors a fresh start by discharging most debts, and to repay creditors in an orderly manner. Bankruptcy proceedings involve filing a petition with financial information to establish a bankruptcy estate. There are two main forms - liquidation under Chapter 7, where non-exempt assets are sold to repay creditors, and reorganization under Chapters 11 or 13, where debts are restructured to allow debt repayment over time.
This document provides an overview of bankruptcy and mortgage deficiency basics, including Chapter 7 and Chapter 13 bankruptcy. It discusses what bankruptcy is, reasons for and against filing, eligibility requirements, exemptions, keeping property, costs, strategic defaults, and dealing with mortgage deficiencies. The key points are that bankruptcy provides a financial "fresh start" but can negatively impact credit, and strategic default may be an option to avoid deficiency if the home is underwater.
This document provides an overview of business failure, bankruptcy, reorganization, and liquidation. It discusses the major causes of business failure, sizes of firms more prone to failure, key issues managers face in financial distress, informal and formal bankruptcy remedies, U.S. bankruptcy law terminology, differences between informal and formal reorganization, prepackaged bankruptcies, priority of claims in Chapter 7 liquidation, and criticisms and recent changes to bankruptcy laws.
Do you want to transfer all your hard earned assets to your loved ones? Have you worked whole your life and you want to be secure for the future of your family? For more information visit: http://margarianlaw.com/
Bankruptcy is a legal process for people or businesses that cannot pay their debts. It is based on federal law and involves court proceedings. The main goals of bankruptcy are to provide relief for debtors and to repay creditors. There are different chapters of bankruptcy for individuals, businesses, municipalities, and foreign companies. Debts can be dischargeable, meaning no longer owed after bankruptcy, or non-dischargeable, requiring payment even after filing. Common dischargeable debts include credit cards, loans, and business or vehicle payments, while non-dischargeable debts often involve taxes, child support, fines, or student loans.
This document analyzes the legal mechanisms that allow creditors to potentially receive a "double-dip" recovery in bankruptcy through asserting claims against both a guarantor entity and primary obligor entity for the same debt. It describes how a creditor can receive an allowed claim for the full amount owed against each debtor. It also explains how bankruptcy law treats intercompany claims and claims for reimbursement in a way that prevents offsetting of recoveries, allowing the creditor to potentially recover more than the amount owed from multiple entities. However, it notes there are risks like substantive consolidation that could eliminate this result.
The Bankruptcy Court ruled that certain secured obligations and associated liens incurred by Tousa and its subsidiaries to pay off a prior lender were avoidable as fraudulent conveyances. The District Court reversed this decision but the 11th Circuit Court of Appeals affirmed the Bankruptcy Court's original ruling, finding that the subsidiaries received no value from the payments and liens. The 11th Circuit held that the loan proceeds must be disgorged from the prior lender. This sets an important precedent that payments to creditors that simply delay bankruptcy without providing reasonably equivalent value can be considered fraudulent conveyances.
What do you understand about Bankruptcy Laws - David Ford Avon CTDavid Ford Avon Ct
This document provides information about various topics related to creditors' remedies and bankruptcy proceedings:
1. It defines different types of creditors' liens like mechanic's liens, artisan's liens, and innkeeper's liens. It also outlines prejudgment attachments and writs of execution that creditors can use.
2. It differentiates between suretyship, where a third party agrees to be liable for a debt, and guaranty arrangements.
3. It provides an overview of the typical steps in a bankruptcy proceeding and compares the different chapters available under the bankruptcy code.
Bankruptcy law in the_united_states_rulesRahul Mishra
Bankruptcy law in the United States allows individuals and organizations to legally deal with inability to pay debts. There are two main types of bankruptcy - voluntary, initiated by the debtor, and involuntary, initiated by creditors. The primary purposes of bankruptcy are to give honest debtors a fresh start by discharging most debts, and to repay creditors in an orderly manner. Bankruptcy proceedings involve filing a petition with financial information to establish a bankruptcy estate. There are two main forms - liquidation under Chapter 7, where non-exempt assets are sold to repay creditors, and reorganization under Chapters 11 or 13, where debts are restructured to allow debt repayment over time.
This document provides an overview of bankruptcy and mortgage deficiency basics, including Chapter 7 and Chapter 13 bankruptcy. It discusses what bankruptcy is, reasons for and against filing, eligibility requirements, exemptions, keeping property, costs, strategic defaults, and dealing with mortgage deficiencies. The key points are that bankruptcy provides a financial "fresh start" but can negatively impact credit, and strategic default may be an option to avoid deficiency if the home is underwater.
This document provides an overview of business failure, bankruptcy, reorganization, and liquidation. It discusses the major causes of business failure, sizes of firms more prone to failure, key issues managers face in financial distress, informal and formal bankruptcy remedies, U.S. bankruptcy law terminology, differences between informal and formal reorganization, prepackaged bankruptcies, priority of claims in Chapter 7 liquidation, and criticisms and recent changes to bankruptcy laws.
Do you want to transfer all your hard earned assets to your loved ones? Have you worked whole your life and you want to be secure for the future of your family? For more information visit: http://margarianlaw.com/
Bankruptcy is a legal process for people or businesses that cannot pay their debts. It is based on federal law and involves court proceedings. The main goals of bankruptcy are to provide relief for debtors and to repay creditors. There are different chapters of bankruptcy for individuals, businesses, municipalities, and foreign companies. Debts can be dischargeable, meaning no longer owed after bankruptcy, or non-dischargeable, requiring payment even after filing. Common dischargeable debts include credit cards, loans, and business or vehicle payments, while non-dischargeable debts often involve taxes, child support, fines, or student loans.
The document discusses the legal theory of "deepening insolvency" which allows creditors to sue a company's officers and directors when their actions prolong the insolvency and increase debt. It summarizes a recent court case, In re Lemington Home for the Aged, where the Third Circuit Court of Appeals recognized "deepening insolvency" as a valid legal claim under Pennsylvania law. The court found that the officers and directors of Lemington Home failed to act with reasonable care and diligence, deepening the insolvency, and allowed the creditors' claims against them to proceed to trial. The ruling provides an opportunity for creditors to recover from officers and directors when their actions expand debt and prolong the insolvency
How to Decide if 7 or 11 is the Right Bankruptcy ChoiceSuzzanne Uhland
Deciding on filing for Chapter 7 or Chapter 11 bankruptcy depends on what future the majority shareholders and or creditors see for the company but many entrepreneurs and experienced business tycoons have found in bankruptcy motivation to keep going and get back on the horse.
This document discusses insolvency and bankruptcy. It defines insolvency as the inability to pay debts when they are due, while bankruptcy is a legal process to resolve insolvency. There are two types of insolvency: cash-flow, where one cannot make a payment due to lack of funds, and balance-sheet, where debts exceed assets. Insolvency can lead to bankruptcy if not addressed through measures like debt repayment plans, borrowing, or renegotiating debts. The document outlines key bankruptcy laws and procedures in the United States.
The document discusses the bankruptcy discharge process. It explains that:
1) A bankruptcy discharge releases debtors from personal liability for certain debts and prohibits creditors from collecting on those debts. However, valid liens remain enforceable.
2) The timing of discharge varies by chapter, but generally occurs 4 months after filing for chapter 7 and after completing all payments under chapter 12 or 13 plans, which usually takes 3-5 years.
3) Not all debts are discharged - there are several categories of debt that are exempt from discharge for public policy reasons, such as certain taxes, debts from fraud or willful/malicious behavior, and student loans. Creditors must object to the discharge of other specified debts.
The document discusses the bankruptcy of Energy Future Holdings, which underwent the largest leveraged buyout in history. It accumulated $40 billion in debt and has now filed for bankruptcy. There is currently a legal dispute over where the bankruptcy proceedings will take place. The bankruptcy could help clarify fraudulent transfer law, as creditors may argue the leveraged buyout constituted a fraudulent transfer. Leveraged buyouts involve taking on substantial debt, making the acquiring company vulnerable if it cannot service the debt. Careful target selection is important to mitigate bankruptcy risk.
If you are having some financial trouble, you may be considering filing for bankruptcy. Before you make this decision, take a few moments to understand the implications and impacts that this will have on you and your family. Consider scheduling an appointment to sit down with a professional that will be sure to file everything correctly for you.
The document discusses key concepts in US bankruptcy law, including:
1) Chapter 11 bankruptcy allows for reorganization of a business while Chapter 7 involves liquidation of assets. Chapter 11 is increasingly being used for liquidations through selling the business as a "going concern".
2) Upon filing for bankruptcy, an automatic stay is put into place that prevents creditors from collecting pre-petition debts or taking other collection actions without court approval.
3) Debtors often file "first day motions", including motions to approve debtor-in-possession (DIP) financing to continue operating during bankruptcy. Courts usually approve DIP financing to allow debtors to continue operating.
4) The document provides an overview
This document provides an overview of key concepts related to bankruptcy, including types of bankruptcies, common shocks experienced during bankruptcy, out-of-court settlement options, steps to file UCC documents, issues related to distressed debtors, actions creditors can take after a bankruptcy filing is made, and definitions of key terms like reclamation and bankruptcy priorities. The document covers corporate and individual bankruptcy filings and considerations, as well as non-bankruptcy liquidation and restructuring alternatives.
Deal Lawyers - Knowing Participation Article 3-5-15Kevin Miller
1. The document discusses conflicting views on the "knowing participation" element of aiding and abetting claims in the context of "dead hand" change of control provisions in credit agreements.
2. It summarizes a Delaware Court of Chancery case, Healthways, where the court refused to dismiss aiding and abetting claims against an administrative agent for including a dead hand provision.
3. However, two subsequent Delaware Court of Chancery cases, Lee v Pincus and In re Comverge, applied a narrower definition of "knowing participation" that arguably would have led to dismissal in Healthways.
This article discusses issues facing individual debtors seeking relief under Chapter 11 bankruptcy. It argues that Congress should amend the Bankruptcy Code to make Chapter 11 work better for individual debtors while still protecting creditors. Specifically, it recommends that Congress: (1) abrogate the absolute priority rule for individual debtors so they can retain assets needed for a fresh start, and (2) allow an unsecured creditor's rejecting vote on a repayment plan to trigger the requirement that the debtor pay disposable income to unsecured creditors. These changes would help individuals reorganize debts under Chapter 11 without losing essential assets, while ensuring fair treatment of creditors.
The document discusses UCC-1 financing statements. It provides background on the Uniform Commercial Code and how Article 9 deals with secured transactions and financing statements. The summary focuses on key aspects of UCC-1 financing statements, including:
- Conducting a UCC search during underwriting to check for existing liens and filing a post-lien search to verify the bank's filing.
- The financing statement serves to provide notice of a lien, perfect the lien, and determine priority among multiple liens.
- Key parts that must be completed correctly include the debtor's name and address, secured party's name and address, and collateral description.
- The collateral description must "reasonably identify"
This document discusses unsecured or "naked" debentures, which are debt instruments issued by companies without any charge on the company's assets. The key points are:
1. Naked debentures create a debtor-creditor relationship between the company and lender without security over company assets. They are valid instruments for borrowing.
2. Creating a naked debenture involves board approval, preparing and executing loan documents like a debenture trust deed, and registering the debenture.
3. A debenture trust deed is still used to protect debenture holders' rights and appoint trustees, even though there is no security. The deed must meet requirements in the Companies Act.
Greenhunter Energy vs. Western EcosystemsJenny Villier
This document summarizes a recent Wyoming Supreme Court case, Greenhunter Energy vs. Western Ecosystems, that analyzed when the veil of a single-member LLC could be pierced. The court established a new two-prong test for piercing an LLC veil under exceptional circumstances. It involved a consulting company not being paid by an LLC. While reiterating that piercing the veil is rare, the court affirmed piercing in this case due to factors like undercapitalization of the LLC and intermingling of the LLC and sole member's finances. The holding raises concerns for practitioners about using single-member LLCs for asset protection going forward.
This affidavit provides background information and summarizes recent events regarding Allied Systems Holdings, Inc. and Allied Systems, LTD. (L.P.) (collectively "Allied"), who filed for Chapter 11 bankruptcy in 2005 and emerged in 2007.
Events of default occurred under Allied's credit agreements due to its deteriorating financial condition. In order to prevent majority shareholder Yucaipa from gaining control and harming lender interests, an amendment placed restrictions on Yucaipa becoming a lender, including limits on the amount of loans it could acquire.
This affidavit supports a motion by petitioning creditors to appoint a Chapter 11 trustee for Allied, claiming Yucaipa's actions have harmed their
Supreme Court of New Jersey Confirms "Fairly Debatable" Standard for First Pa...NationalUnderwriter
Supreme Court of New Jersey Confirms "Fairly Debatable" Standard for First Party Bad Faith; Acknowledges Relevance of Actual Investigation by Frederic J. Giordano and Robert F. Pawlowski
The Supreme Court of New Jersey recently issued an important pair of decisions for policyholders with bad faith claims against their first-party insurance companies in Badiali v. New Jersey Manufacturers Insurance Group[1] and Wadeer v. New Jersey Manufacturers Insurance Company.[2] In Badiali and Wadeer, the court reiterated the narrow “fairly debatable” standard as the threshold for bad faith claims in New Jersey. But, the court also opened the door to modify this standard in the Badiali decision by recognizing the relevance of the actual claims handling in a particular case.
United Corporate Services provides search and filing results tailored specifically to our clients’ needs. Reports sorted by individual debtor per page, or a more comprehensive summary report of all search results on one page, both are easily provided in either .pdf format for secure closings or in Excel format for easy manipulation into your existing closing binder. United Corporate Services files and searches in over 3,000 jurisdictions in the U.S. Understanding their unique requirements ensures accurate processing of all your UCC transactions. Revised Article 9 is once again being “revised,” and we have done the legwork necessary to walk with you through your projects to ensure they are completed timely and accurately.
This document discusses the intersection of business law and bankruptcy. It provides an overview of bankruptcy law concepts including different chapters of bankruptcy, the automatic stay, treatment of secured and unsecured claims, executory contracts, leases, sales of property, and plan confirmation. It also discusses how various business situations could intersect with bankruptcy law, such as when a business, vendor, customer or owner experiences financial troubles. Key areas of focus are reviewing cash flow and debt structure, analyzing claims and contracts, and understanding opportunities to purchase debtor assets.
Bankruptcy basics: What every lawyer should knowMichael Sheridan
Michael Sheridan is a chapter 7 and chapter 13 Minnesota Bankruptcy Attorney. Michael outlines the basics of bankruptcy at a Continuing Legal Education seminar.
Embedded video of the presentation can be found at: https://wmitchell.adobeconnect.com/_a1011281558/p4rm0zjl0uw/?launcher=false&fcsContent=true&pbMode=normal
This document summarizes key bankruptcy concepts in the US legal system. It discusses the differences between Chapter 11 reorganization and Chapter 7 liquidation bankruptcy proceedings. It also outlines automatic stays on collection efforts, debtor-in-possession financing, treatment of pre-petition debts and supplier contracts, creditor remedies like set-off and critical vendor status, disclosure requirements, and involuntary bankruptcy petitions. The summary provides an overview of priority classifications and expected payment of different types of claims.
Technical guide invesstment funds Cayman Islands _April 2022.pdfLoeb Smith Attorneys
Attached is the April 2022 publication of our Technical Brief for Investment Funds, a newsletter developed by the Loeb Smith Cayman Islands Investment Funds Technical Team. This Technical Brief covers, among other things, a number of recent Cayman case law authorities which will have an impact on the practical application of Cayman Islands' law:
Liquidation of a company incorporated in the Cayman Islands – how to determine whether liquidators are sufficiently independent
Test of insolvency for a receivership of a segregated portfolio
Minority shareholder rights under Cayman Islands law
More thoughts on the ruling in The Matter of Padma Fund L.P. and potential impact on Investment Fund practice
Bankruptcy Alert: The Second Circuit Condemns Chapter 11 Plan “Gifting”Patton Boggs LLP
The United States Court of Appeals for the Second Circuit held on February 7, 2011, in
DISH Network Corporation v. DBSD North America, Incorporated that a so-called “gifting” plan, pursuant to which a senior creditor “gifts” a portion of its undisputed bankruptcy
recoveries/distributions to a junior class of creditors or equity holders, skipping an
intermediate objecting class, is prohibited by the absolute priority rule.
The document discusses the legal theory of "deepening insolvency" which allows creditors to sue a company's officers and directors when their actions prolong the insolvency and increase debt. It summarizes a recent court case, In re Lemington Home for the Aged, where the Third Circuit Court of Appeals recognized "deepening insolvency" as a valid legal claim under Pennsylvania law. The court found that the officers and directors of Lemington Home failed to act with reasonable care and diligence, deepening the insolvency, and allowed the creditors' claims against them to proceed to trial. The ruling provides an opportunity for creditors to recover from officers and directors when their actions expand debt and prolong the insolvency
How to Decide if 7 or 11 is the Right Bankruptcy ChoiceSuzzanne Uhland
Deciding on filing for Chapter 7 or Chapter 11 bankruptcy depends on what future the majority shareholders and or creditors see for the company but many entrepreneurs and experienced business tycoons have found in bankruptcy motivation to keep going and get back on the horse.
This document discusses insolvency and bankruptcy. It defines insolvency as the inability to pay debts when they are due, while bankruptcy is a legal process to resolve insolvency. There are two types of insolvency: cash-flow, where one cannot make a payment due to lack of funds, and balance-sheet, where debts exceed assets. Insolvency can lead to bankruptcy if not addressed through measures like debt repayment plans, borrowing, or renegotiating debts. The document outlines key bankruptcy laws and procedures in the United States.
The document discusses the bankruptcy discharge process. It explains that:
1) A bankruptcy discharge releases debtors from personal liability for certain debts and prohibits creditors from collecting on those debts. However, valid liens remain enforceable.
2) The timing of discharge varies by chapter, but generally occurs 4 months after filing for chapter 7 and after completing all payments under chapter 12 or 13 plans, which usually takes 3-5 years.
3) Not all debts are discharged - there are several categories of debt that are exempt from discharge for public policy reasons, such as certain taxes, debts from fraud or willful/malicious behavior, and student loans. Creditors must object to the discharge of other specified debts.
The document discusses the bankruptcy of Energy Future Holdings, which underwent the largest leveraged buyout in history. It accumulated $40 billion in debt and has now filed for bankruptcy. There is currently a legal dispute over where the bankruptcy proceedings will take place. The bankruptcy could help clarify fraudulent transfer law, as creditors may argue the leveraged buyout constituted a fraudulent transfer. Leveraged buyouts involve taking on substantial debt, making the acquiring company vulnerable if it cannot service the debt. Careful target selection is important to mitigate bankruptcy risk.
If you are having some financial trouble, you may be considering filing for bankruptcy. Before you make this decision, take a few moments to understand the implications and impacts that this will have on you and your family. Consider scheduling an appointment to sit down with a professional that will be sure to file everything correctly for you.
The document discusses key concepts in US bankruptcy law, including:
1) Chapter 11 bankruptcy allows for reorganization of a business while Chapter 7 involves liquidation of assets. Chapter 11 is increasingly being used for liquidations through selling the business as a "going concern".
2) Upon filing for bankruptcy, an automatic stay is put into place that prevents creditors from collecting pre-petition debts or taking other collection actions without court approval.
3) Debtors often file "first day motions", including motions to approve debtor-in-possession (DIP) financing to continue operating during bankruptcy. Courts usually approve DIP financing to allow debtors to continue operating.
4) The document provides an overview
This document provides an overview of key concepts related to bankruptcy, including types of bankruptcies, common shocks experienced during bankruptcy, out-of-court settlement options, steps to file UCC documents, issues related to distressed debtors, actions creditors can take after a bankruptcy filing is made, and definitions of key terms like reclamation and bankruptcy priorities. The document covers corporate and individual bankruptcy filings and considerations, as well as non-bankruptcy liquidation and restructuring alternatives.
Deal Lawyers - Knowing Participation Article 3-5-15Kevin Miller
1. The document discusses conflicting views on the "knowing participation" element of aiding and abetting claims in the context of "dead hand" change of control provisions in credit agreements.
2. It summarizes a Delaware Court of Chancery case, Healthways, where the court refused to dismiss aiding and abetting claims against an administrative agent for including a dead hand provision.
3. However, two subsequent Delaware Court of Chancery cases, Lee v Pincus and In re Comverge, applied a narrower definition of "knowing participation" that arguably would have led to dismissal in Healthways.
This article discusses issues facing individual debtors seeking relief under Chapter 11 bankruptcy. It argues that Congress should amend the Bankruptcy Code to make Chapter 11 work better for individual debtors while still protecting creditors. Specifically, it recommends that Congress: (1) abrogate the absolute priority rule for individual debtors so they can retain assets needed for a fresh start, and (2) allow an unsecured creditor's rejecting vote on a repayment plan to trigger the requirement that the debtor pay disposable income to unsecured creditors. These changes would help individuals reorganize debts under Chapter 11 without losing essential assets, while ensuring fair treatment of creditors.
The document discusses UCC-1 financing statements. It provides background on the Uniform Commercial Code and how Article 9 deals with secured transactions and financing statements. The summary focuses on key aspects of UCC-1 financing statements, including:
- Conducting a UCC search during underwriting to check for existing liens and filing a post-lien search to verify the bank's filing.
- The financing statement serves to provide notice of a lien, perfect the lien, and determine priority among multiple liens.
- Key parts that must be completed correctly include the debtor's name and address, secured party's name and address, and collateral description.
- The collateral description must "reasonably identify"
This document discusses unsecured or "naked" debentures, which are debt instruments issued by companies without any charge on the company's assets. The key points are:
1. Naked debentures create a debtor-creditor relationship between the company and lender without security over company assets. They are valid instruments for borrowing.
2. Creating a naked debenture involves board approval, preparing and executing loan documents like a debenture trust deed, and registering the debenture.
3. A debenture trust deed is still used to protect debenture holders' rights and appoint trustees, even though there is no security. The deed must meet requirements in the Companies Act.
Greenhunter Energy vs. Western EcosystemsJenny Villier
This document summarizes a recent Wyoming Supreme Court case, Greenhunter Energy vs. Western Ecosystems, that analyzed when the veil of a single-member LLC could be pierced. The court established a new two-prong test for piercing an LLC veil under exceptional circumstances. It involved a consulting company not being paid by an LLC. While reiterating that piercing the veil is rare, the court affirmed piercing in this case due to factors like undercapitalization of the LLC and intermingling of the LLC and sole member's finances. The holding raises concerns for practitioners about using single-member LLCs for asset protection going forward.
This affidavit provides background information and summarizes recent events regarding Allied Systems Holdings, Inc. and Allied Systems, LTD. (L.P.) (collectively "Allied"), who filed for Chapter 11 bankruptcy in 2005 and emerged in 2007.
Events of default occurred under Allied's credit agreements due to its deteriorating financial condition. In order to prevent majority shareholder Yucaipa from gaining control and harming lender interests, an amendment placed restrictions on Yucaipa becoming a lender, including limits on the amount of loans it could acquire.
This affidavit supports a motion by petitioning creditors to appoint a Chapter 11 trustee for Allied, claiming Yucaipa's actions have harmed their
Supreme Court of New Jersey Confirms "Fairly Debatable" Standard for First Pa...NationalUnderwriter
Supreme Court of New Jersey Confirms "Fairly Debatable" Standard for First Party Bad Faith; Acknowledges Relevance of Actual Investigation by Frederic J. Giordano and Robert F. Pawlowski
The Supreme Court of New Jersey recently issued an important pair of decisions for policyholders with bad faith claims against their first-party insurance companies in Badiali v. New Jersey Manufacturers Insurance Group[1] and Wadeer v. New Jersey Manufacturers Insurance Company.[2] In Badiali and Wadeer, the court reiterated the narrow “fairly debatable” standard as the threshold for bad faith claims in New Jersey. But, the court also opened the door to modify this standard in the Badiali decision by recognizing the relevance of the actual claims handling in a particular case.
United Corporate Services provides search and filing results tailored specifically to our clients’ needs. Reports sorted by individual debtor per page, or a more comprehensive summary report of all search results on one page, both are easily provided in either .pdf format for secure closings or in Excel format for easy manipulation into your existing closing binder. United Corporate Services files and searches in over 3,000 jurisdictions in the U.S. Understanding their unique requirements ensures accurate processing of all your UCC transactions. Revised Article 9 is once again being “revised,” and we have done the legwork necessary to walk with you through your projects to ensure they are completed timely and accurately.
This document discusses the intersection of business law and bankruptcy. It provides an overview of bankruptcy law concepts including different chapters of bankruptcy, the automatic stay, treatment of secured and unsecured claims, executory contracts, leases, sales of property, and plan confirmation. It also discusses how various business situations could intersect with bankruptcy law, such as when a business, vendor, customer or owner experiences financial troubles. Key areas of focus are reviewing cash flow and debt structure, analyzing claims and contracts, and understanding opportunities to purchase debtor assets.
Bankruptcy basics: What every lawyer should knowMichael Sheridan
Michael Sheridan is a chapter 7 and chapter 13 Minnesota Bankruptcy Attorney. Michael outlines the basics of bankruptcy at a Continuing Legal Education seminar.
Embedded video of the presentation can be found at: https://wmitchell.adobeconnect.com/_a1011281558/p4rm0zjl0uw/?launcher=false&fcsContent=true&pbMode=normal
This document summarizes key bankruptcy concepts in the US legal system. It discusses the differences between Chapter 11 reorganization and Chapter 7 liquidation bankruptcy proceedings. It also outlines automatic stays on collection efforts, debtor-in-possession financing, treatment of pre-petition debts and supplier contracts, creditor remedies like set-off and critical vendor status, disclosure requirements, and involuntary bankruptcy petitions. The summary provides an overview of priority classifications and expected payment of different types of claims.
Technical guide invesstment funds Cayman Islands _April 2022.pdfLoeb Smith Attorneys
Attached is the April 2022 publication of our Technical Brief for Investment Funds, a newsletter developed by the Loeb Smith Cayman Islands Investment Funds Technical Team. This Technical Brief covers, among other things, a number of recent Cayman case law authorities which will have an impact on the practical application of Cayman Islands' law:
Liquidation of a company incorporated in the Cayman Islands – how to determine whether liquidators are sufficiently independent
Test of insolvency for a receivership of a segregated portfolio
Minority shareholder rights under Cayman Islands law
More thoughts on the ruling in The Matter of Padma Fund L.P. and potential impact on Investment Fund practice
Bankruptcy Alert: The Second Circuit Condemns Chapter 11 Plan “Gifting”Patton Boggs LLP
The United States Court of Appeals for the Second Circuit held on February 7, 2011, in
DISH Network Corporation v. DBSD North America, Incorporated that a so-called “gifting” plan, pursuant to which a senior creditor “gifts” a portion of its undisputed bankruptcy
recoveries/distributions to a junior class of creditors or equity holders, skipping an
intermediate objecting class, is prohibited by the absolute priority rule.
This document summarizes a recent court case that applied fraudulent conveyance statutes to a pre-bankruptcy sale of assets. In the Crown Stock Distribution case, the debtor sold all its assets to a new company (Newco) financed by a bank loan, then defaulted on the notes and filed for bankruptcy. The court ruled the sale was a fraudulent conveyance, as the debtor received inadequate value and was left with too much debt to avoid bankruptcy. The trustee was entitled to recover cash payments made to shareholders from the sale. The case shows unsecured creditors using legal theories to assert claims against third parties to recover funds for creditors.
Mandatory subordination under the bankruptcy codeDavid S. Kupetz
This document discusses the case of O'Donnell v. Tristar Esperanza Properties, LLC (In re Tristar Experanza Properties, LLC) regarding mandatory subordination under Section 510(b) of the Bankruptcy Code. In Tristar, the Bankruptcy Appellate Panel for the Ninth Circuit concluded that Section 510(b) requires subordination of a claim arising from a member's withdrawal from an LLC, which triggered a buyback of the membership interest. The panel found that the interest in the LLC constituted a "security" and that the arbitration award for damages qualified as a claim for "damages" under Section 510(b).
Commercial & Complex Litigation Newsletter – Hot Topics That Impact Your Busi...CohenGrigsby
In this issue, Successor Liability for Environmental Liabilities by Julie W. Vanneman, PA Adopts the Revised Uniform Arbitration Act: What You Need to Know by Katie R. Jacobs, and The Key to Your CGL Policy: The Misunderstood Word: “Occurrence” by Mark A. May
Presented at 2004 SAM conference; examines how accounting manipulations can radically understate a company's value for it to be seized during an express-bankruptcy
This document provides an overview of bankruptcy law concepts including eligibility for bankruptcy, how bankruptcy changes leverage for parties, why companies file for bankruptcy, and the automatic stay. It discusses a hypothetical scenario involving a distressed Manhattan office building and examines bankruptcy issues that may arise, such as filing eligibility for limited liability companies. The document also covers factors courts examine for bad faith filings and cases where independent directors or "friendly" involuntary bankruptcy petitions were used.
The Supreme Court clarified the code’s object while keeping legislative intent in mind. The court, through this judgement, has struck a balance between creditors’ rights and debtor companies’ remedies.
This document summarizes a court case, In re Bataa/Kierland, LLC, that examines the court's power to disqualify votes on chapter 11 reorganization plans under section 1126(e) of the Bankruptcy Code. The court provided an in-depth analysis of the historical context and legislative intent behind section 1126(e), which was meant to allow courts to override votes made in bad faith. However, more recent cases like Figter have defined bad faith very narrowly, focusing only on obvious fraud rather than votes made to serve ulterior motives beyond self-interest. As a result, creditors now have more flexibility to purchase claims in other classes to manipulate votes, so long as there is no overt
This document provides an overview of corporate finance topics including debentures, charges, capital maintenance, and reduction of capital under company law. It begins by defining debt financing methods companies use to raise capital, such as debentures. It distinguishes between fixed and floating charges on company assets and examines rules regarding priority among charges. The document also discusses the principle of capital maintenance and permissible methods for reducing share capital, including court approval and protecting creditors. Key concepts covered include the definitions and characteristics of debentures, debenture holders, fixed charges, floating charges, and capital reduction.
The document discusses the legal theory of "deepening insolvency" which allows creditors to sue a company's officers and directors when their actions prolong the insolvency and increase debt. It summarizes a recent court case, In re Lemington Home for the Aged, where the Third Circuit Court of Appeals recognized "deepening insolvency" as a valid legal claim under Pennsylvania law. The court found that the officers and directors of Lemington Home failed to act with reasonable care and diligence, deepening the insolvency, and allowed the creditors' claims against them to proceed to trial. The ruling provides an opportunity for creditors to recover from officers and directors when their actions expand debt and prolong the insolvency
This document summarizes mechanics' lien and construction trust fund laws. It discusses how these laws vary by state but generally aim to protect contractors, subcontractors, and suppliers by giving them liens on properties they worked on and making certain project funds held in trust. However, these laws can conflict with secured interests like mortgages and bank accounts. The document examines court cases that have addressed disputes in balancing these competing claims.
This document provides an executive summary of key bankruptcy concepts for creditors in business insolvencies under Chapter 11. It discusses first day motions, the automatic stay, debtor in possession financing, critical vendor motions, administrative claims including the 20-day priority claim, reclamation rights, setoff/recoupment, and disclosure requirements. The summary focuses on outlining creditor remedies and priority status within Chapter 11 bankruptcy proceedings.
Piercing the corporate veil describes a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders or directors. Usually a corporation is treated as a separate legal entity solely responsible for its own debts, but courts may pierce the veil in exceptional situations, such as where a corporation is being used for fraudulent purposes. Piercing the corporate veil is most common for small privately held corporations with few shareholders, limited assets, and where recognizing separateness would promote fraud or inequity. The document then discusses theories and approaches to piercing the corporate veil in Germany, the UK, and the United States.
The document discusses New York LLC law and whether amendments should be made, especially regarding dissolution. It provides background on LLC law and notes issues like ambiguity around dissolution standards. The key points are:
1) New York LLC law allows for judicial dissolution if "not reasonably practicable to carry on business." However, the meaning of this standard is unclear.
2) Unlike corporate law, LLC law does not address dissolution for fraud, illegality or oppression of members.
3) Courts have interpreted the standard differently, creating conflicting case law, as the legislature has not clarified or amended the law in over 15 years.
This document discusses accounting for legal reorganizations and liquidations under bankruptcy. It covers key aspects of bankruptcy law, including the goals of fair distribution of assets and discharge of debt. It describes the differences between voluntary and involuntary bankruptcy, as well as the processes for liquidation under Chapter 7 and reorganization under Chapter 11. It also addresses financial reporting requirements during and after bankruptcy proceedings, including the option for fresh start accounting when certain conditions are met.
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The document discusses key elements and considerations regarding loan guarantees. It begins by noting the increased speed and standardization of lending transactions today compared to the past. It then discusses how loan guarantees are subject to statutes of frauds requiring written evidence, and how standard loan document terms can potentially conflict with separate guarantee agreements. The document aims to remind lawyers of important guarantee provisions, such as the parties, recitals describing the purpose and consideration, the guaranteed obligations, notice and demand requirements, and other clauses.
This document is an expedited motion by petitioning creditors BDCM Opportunity Fund II, LP, Black Diamond CLO 2005-1 Ltd., and Spectrum Investment Partners, LP for the appointment of a Chapter 11 trustee in the bankruptcy cases of Allied Systems Holdings, Inc. and Allied Systems, Ltd. (L.P.). The petitioning creditors argue that a trustee should be appointed because Yucaipa American Alliance Fund I, LP's control over the debtors through its majority ownership of equity and appointment of board members creates conflicts of interest that prevent the debtors from fulfilling their fiduciary duties.
Similar to Kronfeld ABI corp separateness article (20)
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The Essential Resource for Today’s Busy Insolvency Professional
Financial Statements
By Mark P. Kronfeld, Vincent Indelicato and Chris Theodoridis1
The Murkiness of Corporate
Separateness in Chapter 11
T
he doctrine of corporate separateness is one of
the bedrock principles of American corporate
law and has long served as the default pre-
sumption where courts adjudicate matters involving
multiple legal entities.2
As a general rule, a corpora-
tion is not liable for the debts of another corporate
entity (even its parent, subsidiaries or affiliates).3
The principle of corporate separateness is gener-
ally only challenged when debtors encounter finan-
cial distress. Not surprisingly, the question of corpo-
rate separateness has emerged as a fertile source of
debate in many recent bankruptcy cases, but nothing
about chapter 11 alters the landscape; the default
presumption of corporate separateness continues
to persist in bankruptcy.4
While bankruptcy courts
routinely consolidate chapter 11 cases of affiliated
debtors for administrative purposes, joint admin-
istration does not in any way shatter the corporate
separateness of each debtor.5
A number of exceptions to this default presump-
tion, however, arise in the bankruptcy setting. For
example, affiliated debtors pledge their assets to
secure post-petition financing in most cases, regard-
less of which debtors need or use the proceeds, and
centralized cash-management systems frequently
allow each debtor to use affiliated debtors’ cash,
with intercompany claims only sometimes being
assessed or protected. Further, corporate entities
(typically affiliates) often, by contract, agree to be
liable for the debts of another entity by providing
a guaranty. Alternatively, specific statutes, such as
the Financial Institutions Reform, Recovery and
Enforcement Act (FIRREA) and the Employee
Retirement Income Security Act (ERISA), may give
rise to exceptions from corporate separateness.6
Perhaps the most far-reaching exception to
the doctrine of corporate separateness in chapter
11 lies in the ability of a bankruptcy court to sub-
stantively consolidate the assets and liabilities of
numerous distinct legal entities and treat them as if
they belong to one single entity.7
Some courts have
attempted to make the test for substantive consoli-
dation objective8
while other courts have weighed
benefits against burdens,9
creating confusion about
how a court will weigh different factors. Other
controversial exceptions to corporate separateness
include successor liability, control-person liability
and corporate veil-piercing.
Even in the absence of substantive consolidation
or other exceptions to corporate separateness, various
forms of relief granted in bankruptcy cases some-
times treat entities as if they have been substantively
consolidated. This article highlights four examples
in the bankruptcy context where the lines separating
corporate entities have arguably been blurred.
Section 1129(a)(10):
Per Plan or Per Debtor?
Under § 1129(a)(10) of the Bankruptcy Code,
if a class of claims is impaired under a plan, then
1 The authors thank Martin Bienenstock and Philip Abelson of Proskauer for their assis-
tance in connection with this article.
2 See, e.g., On-Line Servs. Ltd. v. Bradley & Riley PC (In re Internet Navigator Inc.), 301
B.R. 1, 6 (B.A.P. 8th Cir. 2003) (“[T]his Court is unwilling on this record to capsize the
fundamental bulwark of corporate law that the corporate entity is separate and distinct
from its individual members.”).
3 See, e.g., United States v. Bestfoods, 524 U.S. 51, 61 (1998) (“It is a general principle of
corporate law deeply ‘ingrained in our economic and legal systems’ that a parent corpo-
ration ... is not liable for the acts of its subsidiaries.”).
4 See, e.g., AL Tech Specialty Steel Corp. v. Allegheny Int. Credit Corp., 104 F.3d 601,
608 (3d Cir. 1997) (in bankruptcy, absent certain exceptions, affiliated entities “must be
considered separate entities”).
5 See, e.g., Bunker v. Peyton (In re Bunker), 312 F.3d 145, 153 (4th Cir. 2002) (“Joint
administration does not affect the substantive rights of either the debtor or his or
her creditors.”).
6 See 12 U.S.C. § 1815(e)(1)(A) (FIRREA cross-guarantee provision imposing liability on any
bank owned by bank-holding company for losses caused by failure of sister bank); 29
U.S.C. § 1082(b)(2) (ERISA provision imposing joint and several liability on all members of
controlled group).
7 See FDIC v. Colonial Realty Co., 966 F.2d 57, 58 (2d Cir. 1992).
8 See, e.g., In re Owens Corning, 419 F.3d 195 (3d Cir. 2005); In re Augie/Restivo Baking
Co., 860 F.2d 515 (2d Cir. 1988).
9 See, e.g., Eastgroup Properties v. Southern Motel Assoc. Ltd., 935 F.2d 245 (11th
Cir. 1991).
Vincent Indelicato
Proskauer; New York
Mark P. Kronfeld
BlueMountain Capital
Management LLC
New York
2. 44 Canal Center Plaza, Suite 400 • Alexandria, VA 22314 • (703) 739-0800 • Fax (703) 739-1060 • www.abiworld.org
at least one noninsider impaired class must vote
to accept the plan. Although the Code is arguably
clear that each debtor’s plan must have at least
one impaired accepting class, some decisions have
raised the question of whether in a multi-debtor
case § 1129(a)(10) imposes a “per debtor” or “per
plan” requirement.
The courts in In re Tribune Co.10
and In re JER/
Jameson Mezz Borrower II LLC11
explicitly reject-
ed the joint plan or “per plan” approach and ruled
that the impaired accepting class requirement of
§ 1129(a)(10) applies to each individual debtor. In
Tribune, the court noted that the plan emphasized
the separateness of the debtors’ estates and did not
provide for substantive consolidation.12
The court
further noted that other sections of § 1129(a) clear-
ly include all debtors under a joint plan and that
§ 1129(a)(10) must be read consistently.13
Lastly,
the court observed that administrative convenience
is simply insufficient to “disturb the rights of
impaired classes of creditors of a debtor not meet-
ing confirmation standards.”14
By contrast, in In re Transwest Resort
Properties,15
the court confirmed a joint plan with
one impaired accepting class of creditors for only
one of the debtors under the plan, over the objec-
tion of the mezzanine lender. Although the mezza-
nine lender appealed, the district court dismissed the
appeal on equitable-mootness grounds, leaving the
§ 1129(a)(10) issue undecided.
Similarly, in In re Charter Communications,16
the
court adopted a “per plan” approach to § 1129(a)(10)
permitting use of one impaired accepting class for
one debtor to count as an impaired accepting class
for an affiliated debtor.17
The court reasoned that the
“evidence support[ed] a finding that the business
of Charter [was] managed by CCI on an integrated
basis, making it reasonable and administratively
convenient to propose a joint plan.”18
Charter settled
before an appellate court ruled.
The relevant inquiry in the context of
§ 1129(a)(10) jurisprudence focuses on whether bank-
ruptcy courts should respect the corporate separateness
of multiple debtors for the purposes of fulfilling plan-
confirmation requirements. As corporate separateness
is “the rule [and] not the exception,”19
corporate sep-
arateness should be respected barring an established
exception supported by evidence. Moreover, absent
substantive consolidation, permitting creditors of one
debtor entity to cram down creditors of an entirely
different debtor entity arguably causes an untenable
disenfranchisement of those aggrieved creditors and
does not encourage consensual global plans.
Bankruptcy-Remote SPVs
Within a corporate enterprise, special-pur-
pose vehicles (SPVs) are often created to be
insulated from the financial condition of the
remaining enterprise. SPVs are commonly struc-
tured to be “bankruptcy-remote” in an effort to
protect creditors from becoming entangled in a
bankruptcy case, but recent case law shows that
bankruptcy remoteness does not equate to being
bankruptcy-proof.
In Gen. Growth Props. Inc.,20
the debtors com-
prised a large commercial real estate enterprise.
Among the affiliated entities were numerous bank-
ruptcy-remote SPVs. The SPV lenders believed the
SPVs to be bankruptcy-proof because the SPVs’
independent boards of directors were picked by
the lenders, and those directors could not authorize
a bankruptcy filing without the lenders’ consent.
Immediately before the corporate enterprise filed
for bankruptcy, however, the debtors replaced the
SPVs’ independent directors with new directors
who then authorized the bankruptcy filings for the
SPVs without the lenders’ consent.
Although many of the SPVs did not need bank-
ruptcy relief, the court denied the lenders’ motion
to dismiss the bankruptcy cases of the SPVs, hold-
ing, among other things, that the interests of the
enterprise as a whole could be considered in deter-
mining whether to file individual SPVs. While
“[n]othing in [the court’s] opinion implie[d] that
the assets and liabilities of any of the [debtors]
could properly be substantively consolidated with
those of any other entity,”21
the court was clear
that individual chapter 11 cases are not to be
viewed in a black box simply because the debt-
ors are separate corporate entities. Whether future
cases will take the holding in General Growth one
step further remains to be seen.
Section 510(b)
When applied in the multi-debtor context,
§ 510(b) of the Bankruptcy Code can potentially
lead to outcomes that conflict with the notion of
corporate separateness. Section 510(b) provides:
For the purpose of distribution under this
title, a claim ... for damages arising from the
purchase or sale of a security of the debtor
or an affiliate of the debtor ... shall be sub-
ordinated to all claims or interests that are
senior to or equal to the claim or interest rep-
resented by such security, except that if such
security is common stock, such claim has the
same priority as common stock.22
In Lernout & Hauspie Speech Products NV
(L&H),23
the court held that the claim against the
subsidiary debtor arising from the purchase by the
10 464 B.R. 126 (Bankr. D. Del. 2011).
11 461 B.R. 293 (Bankr. D. Del. 2011).
12 In re Tribune Co., 464 B.R. at 182.
13 Id.
14 Id.
15 No. 10-37134 (Bankr. D. Ariz. Dec. 16, 2011).
16 419 B.R. 221 (Bankr. S.D.N.Y. 2009).
17 Id. at 226.
18 Id.
19 Anderson v. Abbott, 321 U.S. 349, 362 (1944).
20 409 B.R. 43 (Bankr. S.D.N.Y. 2009).
21 Id. at 69.
22 11 U.S.C. § 510(b).
23 264 B.R. 336 (Bankr. D. Del. 2001).
Chris Theodoridis
Proskauer; New York
Mark Kronfeld is a
managing director of
BlueMountain Capital
Management LLC in
New York. Vincent
Indelicato and Chris
Theodoridis are
associates in the
Business Solutions,
Governance,
Restructuring and
Bankruptcy Group
at Proskauer in
New York.
3. 44 Canal Center Plaza, Suite 400 • Alexandria, VA 22314 • (703) 739-0800 • Fax (703) 739-1060 • www.abiworld.org
claimant of the parent debtor’s equity securities must be
subordinated to general unsecured claimants in the subsid-
iary, but may be treated pari passu for distribution purposes
with other equity security-holders of the subsidiary, even
though the claimant never owned any of the subsidiary’s
equity. The court acknowledged the ambiguity in the lan-
guage of § 510(b) but relied on policy arguments, its inter-
pretation of legislative history and pre-Code case law.24
The ambiguity in § 510(b) arises from two phrases: “aris-
ing from the purchase or sale of a security of the debtor or an
affiliate of the debtor” and “represented by such a security.”
The key question is, against which debtor entity should the
subordinated claim be asserted? The language “such a secu-
rity” suggests that one should “follow the security” to assert
the subordinated claim against the same entity that issued the
underlying security. This was the argument advanced by the
debtor in L&H.25
However, the language “debtor or an affiliate” has been
interpreted by some, including the claimant in L&H, to
permit a claim subordinated under § 510(b) to be asserted
against one debtor entity even though the security giving
rise to the § 510(b) claim was issued by a different debtor
entity (albeit an affiliate).26
The L&H court ruled in favor
of the claimant.
A similar outcome was reached in VF Brands Inc.,27
in which the court appeared to take the position that
§ 510(b) mandates that subordinated claims held by a
subsidiary’s shareholders be treated on a par with the
claims of the parent’s shareholders. The court noted
that “[t]he language of section 510(b) applies equally to
claims arising from purchase of the stock of an affiliate,
including a subsidiary, of the debtor as it does to the pur-
chase of stock of the debtor itself.”28
Based on this interpretation, courts may interpret
§ 510(b) to allow subordinated claims against any debt-
or entity as long as the underlying security was issued by
one of that debtor’s affiliates. This broad interpretation of
§ 510(b) seems to treat separate debtor entities as inter-
changeable, which some may argue is inconsistent with the
principle of corporate separateness.
Multiple Claims Arising from a Transaction
The notion that different debtors may be liable for the
same obligation because of joint and several liability or
guarantees is not controversial. In such instances, all of
the creditor’s claims will generally be allowed in their full
amount subject to the qualification that the creditor may not
recover in the aggregate more than the full amount owed to
the creditor.29
But what happens when a single transaction triggers a
series of transfers, causing multiple claims by different
creditors to be asserted against a single debtor? In such
instances, commonly seen in the “double-dip bond” context,
multiple claims are typically allowed even when they arise
from a single originating transaction because the claims are
asserted by separate creditor entities.30
Yet recoveries from
multiple claims arising from a single transaction continue to
emerge as sources of dispute in recent high-profile chapter
11 cases, including Lehman Brothers, General Motors and
AbitibiBowater.
A common example is where a creditor possesses (1) a
direct claim against a debtor finance subsidiary based on the
subsidiary’s issuance of debt held by the creditor and (2) a
guaranty claim held by the same creditor against the sub-
sidiary’s parent, also a debtor entity, based on the parent’s
guaranty of the debt issued by the subsidiary. The same sub-
sidiary will often assert a separate claim against the parent
guarantor either because the subsidiary has loaned the pro-
ceeds of the debt issuance to the parent guarantor or because
the subsidiary was a Nova Scotia “Unlimited Liability
Company.”31
This incremental claim asserted by the subsid-
iary against the parent guarantor enhances recoveries of the
subsidiary’s creditors.
In cases similar to the aforementioned example, some
have argued that the guarantee claim held by the creditor
is duplicative of the intercompany claim asserted by the
subsidiary against the parent. Although courts have not yet
ruled directly on this issue, to conflate the two distinct claims
would arguably require the court to consider the concept of
corporate separateness mere form and not substance.
Conclusion
Despite the bedrock principle of corporate separateness,
modern bankruptcy jurisprudence demonstrates several irrec-
oncilable viewpoints that blur the lines separating corporate
entities. An awareness and understanding of where the lines
blur is critical to a creditor’s ability to assess and calculate
the risks inherent in the bankruptcy process. abi
Reprinted with permission from the ABI Journal, Vol. XXXII, No. 5,
June 2013.
The American Bankruptcy Institute is a multi-disciplinary, non-
partisan organization devoted to bankruptcy issues. ABI has
more than 13,000 members, representing all facets of the
insolvency field. For more information, visit ABI World at www.
abiworld.org.
24 Id. at 341-45.
25 Id. at 341.
26 Id.
27 275 B.R. 725, 726-27 (Bankr. D. Del. 2002).
28 Id. at 727.
29 See In re Gessin, 668 F.2d 1105, 1107 (9th Cir. 1982) (creditor’s claim against guarantor not reduced by
amount received from principal debtor).
30 See In re Delta Air Lines Inc., 608 F.3d 139, 149 (2d Cir. 2010) (ruling that where “claims arise under
agreements (1) between different parties, (2) addressing different events and (3) providing for different
remedies,” claims are allowed in full against debtor, and rejecting proposition that “a single loss can only
give rise to a single claim in bankruptcy”); see also Mark P. Kronfeld, “The Anatomy of a Double-Dip,”
XXXI ABI Journal 2, 24-25, 68-69, March 2012.
31 Companies Act, R.S.N.S., 1989, c. 81, s. 135.