Creditors finally have a definitive answer. The Delaware Supreme Court has now held in North American Catholic Educational Programming Foundation Inc v.
Long-standing precedent in the First Circuit had held that claims arising out of stock redemptions, including notes payable to the former shareholders as the consideration for the redemption of their stock, were subject to subordination to the claims of creditors when the corporation later became insolvent without any showing of inequitable conduct on the part
While much of the attention on the business side of BAPCPA has been focused on the demise of KERPS, the capping of exclusivity and limitations on extensions of time to assume or reject commercial leases, several other provisions may prove as, if not more, nettlesome to debtors attempting to reorganize, particularly in small- and smaller-cap chapter 11 cases.
The “good-faith filing” doctrine has generated recent precedent and more than a little controversy. A recently published decision from the Georgia bankruptcy court shows that the doctrine has also become a weapon used by courts, that are so inclined, to battle the filing of “chapter 22” (serial chapter 11) cases.
At first blush, the recent decision of the Delaware Bankruptcy Court in In re Fleming Companies, Inc., 2003 WL 23018828 (Bankr. D. Del. 2003), appears to be just another example of a not-terribly-pleased bankruptcy judge exercising discretion to reduce fees in yet another mega bankruptcy case. However, chapter 11 practitioners in cases large and small should avoid dismissing the result and look carefully at the rationale.
A decision out of the U.S. Bankruptcy Court for the Southern District of New York raises questions about what many have considered to be a routine order in large chapter 11 cases. In In re: Spiegel, Inc., 2003 Bankr. LEXIS 435 (May 7, 2003), the bankruptcy court while not outright denying the application, declined, on the record in front of it, to enter a “Securities Trading Order,” and generally expressed reservations about such orders.
The allowance of claims and recovery of avoidable transfers are important, complementary principles in the adjustment of the debtor-creditor relationship. Like Themis personified, claims are modified or expunged to ensure that distributive justice is accomplished through the bankruptcy claim allowance and distribution process, while preferential transfers are disgorged from creditors who, by accident or design, lingered too long at the well before the commencement of a bankruptcy case.
Section 365(d)(3) requires chapter 11 debtors to timely perform all obligations “arising from and after the order for relief under any unexpired lease of nonresidential real property, until such lease is assumed or rejected.” Section 365(d)(3) specifically provides that such sums are due “notwithstanding §503(b)(1).” Thus, obligations can be due under §365(d)(3) even when there is no demonstrable benefit to the estate.