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Current issues in Chapter 15 discovery
Caplin & Drysdale, Chartered
  • Insolvency & Restructuring
  • USA
  • 24 August 2018

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.

How will Section 546(e) apply to public securities transactions in wake of Merit Management?
Caplin & Drysdale, Chartered
  • Insolvency & Restructuring
  • USA
  • 25 May 2018

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.

Narrower harbours: Supreme Court limits Section 546(e) securities safe harbour
Caplin & Drysdale, Chartered
  • Insolvency & Restructuring
  • USA
  • 30 March 2018

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.

First Circuit finds creditors' committees have unconditional right to intervene in adversary proceedings
Caplin & Drysdale, Chartered
  • Insolvency & Restructuring
  • USA
  • 09 February 2018

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.

Supreme Court to consider statutory safe harbour for debtors' pre-petition securities transactions
Caplin & Drysdale, Chartered
  • Insolvency & Restructuring
  • USA
  • 29 September 2017

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.

Chapter 15 at 11: threshold requirements for recognition
Caplin & Drysdale, Chartered
  • Insolvency & Restructuring
  • USA
  • 24 March 2017

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.

Qualified retirement plans in 2017 and beyond: first Operational Compliance List issued
  • Corporate Tax
  • USA
  • 24 March 2017

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.

Captive insurance: state reporting obligations for transactions of interest
  • Corporate Tax
  • USA
  • 03 March 2017

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.

IRS launches issue-based corporate compliance campaigns
  • Corporate Tax
  • USA
  • 24 February 2017

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.

Syndicated conservation easement transactions identified as new 'listed transactions'
  • Corporate Tax
  • USA
  • 27 January 2017

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.

Treasury issues regulations addressing use of LLCs to disguise beneficial ownership
  • Corporate Tax
  • USA
  • 20 January 2017

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.

Qualified retirement plans in 2017 and beyond: resources and considerations for employers
  • Corporate Tax
  • USA
  • 13 January 2017

The Internal Revenue Service (IRS) recently announced the elimination of the five-year remedial amendment cycle system for individually designed qualified retirement plans. The IRS further announced that each year it will publish a Required Amendments List and an Operational Compliance List in place of the cumulative list of amendments that previously provided guidance on these plans.

Chapter 15 at 11: Chapter 15 provides provisional relief in Hanjin Shipping
Caplin & Drysdale, Chartered
  • Insolvency & Restructuring
  • USA
  • 06 January 2017

Following a Chapter 15 petition to recognise Korean insolvency proceedings as foreign main proceedings, the Bankruptcy Court for the District of New Jersey recently granted an order of provisional relief that includes application of the automatic stay to block the enforcement of maritime liens and the seizure of shipping company Hanjin's vessels. The case demonstrates how essential provisional relief can be for foreign debtors to preserve the status quo and maintain business operations before a recognition ruling.

Congress looks to fix new partnership audit rules
  • Corporate Tax
  • USA
  • 06 January 2017

The Bipartisan Budget Act of 2015 fundamentally changed the rules by which partnerships and entities taxed as partnerships interact with the Internal Revenue Service in an audit or litigation. Many practitioners have expressed concern that the Bipartisan Budget Act partnership audit rules are unclear and unworkable, and impose significant administrative burdens on taxpayers. Congress has now proposed technical corrections in an attempt to clarify and introduce practicality to the new rules.

Voluntary disclosure window closing for bitcoin users
  • Corporate Tax
  • USA
  • 16 December 2016

A federal court recently authorised the Internal Revenue Service (IRS) to issue a John Doe summons to Coinbase Inc, which operates a web-based global convertible digital currency platform and the largest platform in the United States for the conversion of bitcoins. Taxpayers using virtual currency transactions involving Coinbase who are not in tax compliance have an extremely short window to avoid potentially serious IRS action.

Captive insurance: new IRS tax reporting has potential for penalties and examinations
  • Corporate Tax
  • USA
  • 25 November 2016

The Internal Revenue Service recently issued a notice identifying certain transactions relating to small captive insurers as 'transactions of interest'. The new designation throws small captive insurer transactions into a tax reporting regime that could potentially lead to significant penalties and income tax and promoter examinations.

New regulations change allocation of partnership liabilities
  • Corporate Tax
  • USA
  • 04 November 2016

The Treasury Department and the Internal Revenue Service recently issued revised regulations governing how recourse partnership liabilities are allocated among partners. Under the new regulations, certain guarantees, indemnities and similar arrangements classified as 'bottom-dollar payment obligations' will be disregarded for the purpose of characterising partnership liabilities as recourse obligations.

Chapter 15 at 11: Bankruptcy Code's cross-border insolvency law approaches 11th anniversary
Caplin & Drysdale, Chartered
  • Insolvency & Restructuring
  • USA
  • 30 September 2016

Chapter 15 of the Bankruptcy Code, which deals with cross-border insolvency cases, took effect nearly 11 years ago. Congress enacted Chapter 15 in 2005 to replace Section 304 of the code, which previously addressed transnational insolvencies. Chapter 15 largely incorporates the United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency.

Supreme Court to review priority-skipping settlement and structured dismissal of Chapter 11 case
Caplin & Drysdale, Chartered
  • Insolvency & Restructuring
  • USA
  • 05 August 2016

The Supreme Court will soon consider whether a Chapter 11 debtor in dire straits can settle claims of the bankruptcy estate, receive court approval to distribute the settlement proceeds to junior creditors without paying priority claims and then obtain dismissal of the bankruptcy case on terms that leave the priority-skipping settlement intact, or whether such a resolution violates essential aspects of the Bankruptcy Code.

Supreme Court nixes Puerto Rico insolvency law, but Congress legislates new path
Caplin & Drysdale, Chartered
  • Insolvency & Restructuring
  • USA
  • 22 July 2016

The Supreme Court has ruled that the US Bankruptcy Code pre-empts the Recovery Act, which Puerto Rico enacted in 2014 to address its mounting debt crisis. The question before the Supreme Court was whether the pre-emption provision contained in Chapter 9 applied to bar Puerto Rico from enacting its own bankruptcy scheme for restructuring the debts of its municipalities and public utilities.

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