Business Reorganization

Let’s Keep This Between Us: Protecting PII in Bankruptcy Sales

Privacy issues are not new to corporate reorganizations; §§ 322 and 363(b)(1) were enacted as part of BAPCPA precisely to address such concerns.[1]  In an increasingly digital age, reorganizing debtors may possess a slew of personally identifiable information (PII), itself a term defined at § 101(41A).[2]  These issues have come to the forefront in connection with the recent ConnectEDU bankruptcy and asset sale.[3]

Rejection Pursuant to § 365(h) and (n): Counterparty Protection or Paper Tiger?

One of the fundamental rights afforded to a debtor is the right to reject burdensome contracts and unexpired leases. However, where the debtor is the lessor of real property or the assignor of intellectual property, rejection of the underlying agreement could be catastrophic to the nondebtor counterparty. Recognizing the potential prejudice to contract counterparties, Congress incorporated provisions into the Bankruptcy Code (§§ 365(f) and 365(n)) that permit these affected nondebtor parties to continue to use the leased properties for the life of the term, if they so choose.

Tax-Sharing Agreements and Property of the Estate: Choose Your Language Wisely

Every dollar counts, and for debtors that are party to tax-sharing agreements (“TSAs”), significant dollars may be at stake. As the Sixth and Ninth Circuit Courts of Appeals have demonstrated, when dealing with tax refunds and TSAs, it is not always clear that a debtor’s estate is entitled to every dollar.

Using Foreign Legal Systems to Restructure Successfully: The U.K. and U.S. Perspectives

This two-part article discusses how the United Kingdom and the United States have become the two main jurisdictions where debtors outside of such jurisdictions (foreign debtors) have been able to successfully restructure their businesses. Because of the flexibility of both legal systems and their focus on reorganization as opposed to liquidation, which often would be the outcome of the debtors’ domestic insolvency process, foreign debtors have used the U.K. or U.S. legal systems to restructure successfully.

The Recent Use of Combined Disclosure Statement and Plan Hearings in Delaware

[1]In some bankruptcy courts, the use of combined hearings on chapter 11 disclosure statements and plans in non-prepackaged, non-small business cases is expressly contemplated by local rule and relatively common.[2] Delaware, which is so often on the cutting edge of chapter 11 practice, has not spoken one way or the other on the use of combined hearings in non-prepackaged, non-small business cases in its local rules or standing orders.

Crumbs Bake Shop’s Trademark Licensees Permitted to Continue Using Brand Name Despite Rejection of Licenses and “Free and Clear” Sale of Debtors’ Assets

Bankruptcy Code § 365(n) provides significant protections to licensees under intellectual property licenses that are rejected by debtor-licensors.[1] Section 365(n) permits a licensee to retain its rights in licensed intellectual property post-rejection in exchange for the continued payment of royalties.[2] Where the licensee elects to retain its rights, the debtor-licensor has no continuing obligations under the license.[3]

More Lehman: Subordination of Claim Must Be from the Securities of the Debtor

[1]In the latest installment of the Lehman Brothers subordination litigation, the U.S. Bankruptcy Court for the Southern District of New York held that certain creditors’ claims were not claims for damages arising from “securities of the debtor,” and did not have to be subordinated to claims of creditors, notwithstanding that the debtor was treated as an issuer, for regulatory purposes, as an issuer of the mortgage-backed securities.[2]

Claims-Trading: Evolving Standards for Claim Classification and Vote Designation?

The secondary bankruptcy claims market has become big business over the past several years, resulting in a proliferation of court rulings that underscore risks and “regulation” around claims-trading, especially when claims are purchased for strategic objectives and not anticipated cash recovery. Commentators have reviewed the decisions of In re KB Toys Inc.,[1] Dish Network Corp. v. DBSD N. Am. Inc. (In re DBSD N. Am.

Claims-Trading: Taking the “Good” with the “Bad”

[1]Over the years, claims-trading has become the norm in bankruptcy cases. Claims are bought and sold for various reasons, including to liquidate a position, profit from an increase in the claim’s value and/or leverage a claim into the ownership of the debtor. Regardless of the reason, litigation has arisen as to whether the buyer of a claim will be subject to the same attacks as the original claim owner. Based upon recent case law, the courts seem to be saying “yes.”

Using Foreign Legal Systems to Successfully Restructure: The U.K. and U.S. Perspectives: Part I

Editor’s Note: This two-part article discusses how the U.K. and U.S. have become the two main jurisdictions where debtors outside of such jurisdictions (foreign debtors) have been able to successfully restructure their businesses. Due to the flexibility of both legal systems and their shared focus on reorganization as opposed to liquidation, which often would be the outcome of the debtors’ domestic insolvency process, foreign debtors have used the U.K. or the U.S. legal systems to successfully restructure.

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