Unlike Chapter 7 liquidations and Chapter 11 reorganisations, cases filed under Chapter 15 of the Bankruptcy Code are ancillary – essentially functioning in aid of recognised foreign insolvency proceedings. This article considers the discovery tools available to foreign representatives under Chapter 15 and two key issues relating to Chapter 15 discovery: seal-and-gag orders and the recent decision in Platinum Partners.
The Supreme Court's decision in Merit Management construes Section 546(e) of the Bankruptcy Code more narrowly than most lower courts have done before. Often referred to as the securities 'safe harbour', this provision prevents a bankruptcy trustee from unwinding settlement payments or other transfers made in connection with securities contracts if the payments or transfers were "made by or to (or for the benefit of)" certain kinds of market participant, including any stockbroker or financial institution.
The Supreme Court recently held that Section 546(e) of the Bankruptcy Code does not apply to transfers in which financial institutions are mere intermediaries. This decision plainly rejects what was, in many judicial circuits, a long-held interpretation of Section 546(e) and leaves certain transactions previously thought to be inviolate vulnerable to later being unwound if one of the parties files for bankruptcy within the relevant statutory period.
The First Circuit Court of Appeals recently held that Section 1109(b) of the Bankruptcy Code provides a creditors' committee with an "unconditional right to intervene" in an adversary proceeding. This decision further bolsters the right of creditors' committees to intervene in and be heard on all matters within a bankruptcy case and positions the First Circuit in line with the Second and Third Circuits, which both have similarly concluded that the code affords an unconditional right to intervene.
In an upcoming case, the Supreme Court will address the question of whether the Bankruptcy Code bars a bankruptcy trustee from avoiding a debtor's constructively fraudulent pre-petition securities transactions merely because the deal was executed through a financial intermediary with no stake of its own in the transaction. The issue turns on the meaning of Section 546(e) of the Bankruptcy Code.
The Internal Revenue Service recently published the first Operational Compliance List since the elimination of the five-year remedial amendment cycle system for individually designed qualified retirement plans. The list identifies certain mandatory and discretionary plan amendments, as well as other significant guidance that affects plan operations.
Recognition of a foreign proceeding opens the door to mandatory or discretionary relief from the bankruptcy court, depending on whether the foreign proceeding is a foreign main proceeding or a foreign non-main proceeding. Two threshold requirements for obtaining recognition under Chapter 15 of the Bankruptcy Code, which took effect 11 years ago, are the existence of a duly designated foreign representative and a foreign proceeding.
The Internal Revenue Service recently issued Notice 2016-66, which identifies certain transactions relating to micro-captive insurers as 'transactions of interest'. This designation brings covered captive insurers into a federal reporting regime that requires participants in such transactions, as well as their advisers, to meet certain one-off and annual filing obligations.
The Internal Revenue Service (IRS) recently launched its first wave of compliance campaigns. They cover a broad range of topics, including Tax Equity and Fiscal Responsibility Act partnerships, micro-captive insurance transactions, transfer pricing and repatriation of foreign earnings. This new issue-focused approach means that businesses dealing with any of the identified issues face increased IRS audit risk and should work with their legal advisers to prepare for IRS challenges to their positions.
The Internal Revenue Service (IRS) recently issued Notice 2017-10, identifying certain transactions involving conservation easements as 'listed transactions'. For several years the IRS has been actively examining conservation easements. The new listed transaction designation puts certain conservation easement transactions into a tax reporting and record-keeping regime that may lead to additional IRS income tax and promoter examinations and potentially significant penalties.
The Internal Revenue Service (IRS) recently issued final regulations requiring foreign-owned, single-member limited liability companies to disclose to the IRS their beneficial owners by obtaining a US tax identification number and filing annual returns. Wealth advisers and their clients should be aware that failure to comply could result in significant civil penalties and, if wilful, potential criminal penalties under US law.