News & Analysis as of

Recharacterization

House Bill Proposes Major Modifications To Employee Compensation And Benefits-Related Laws; Initial Amendments Provide Limited...

by Katten Muchin Rosenman LLP on

The Tax Cuts and Jobs Act proposed by the US House of Representatives on November 2 (House Bill) proposes major modifications to employee and partner compensation and benefits-related provisions of the Internal Revenue Code,...more

Supreme Court Declines to Resolve Circuit Split on Debt Recharacterization

On August 10, 2017, the U.S. Supreme Court rescinded the grant of certiorari in PEM Entities LLC v. Levin on the grounds that review had been “improvidently granted.” The case seemingly provided a perfect vehicle to resolve...more

Loans to U.S. Subsidiaries Should Be Carefully Structured and Documented to Obtain U.S. Tax Benefits

by Dorsey & Whitney LLP on

Canadian companies should carefully structure and document loans and advances to their U.S. subsidiaries. If loans to U.S. subsidiaries are not properly structured and documented, such loans may be recharacterized as equity...more

Lehman Ruling Sets Stage For Future Subordination Contests

In the case In re Lehman Brothers Holdings Inc., 855 F.3d 459 (2d Cir. 2017), the U.S. Court of Appeals for the Second Circuit affirmed a district court order subordinating the claims of former Lehman Brothers employees for...more

In Brief: Second Circuit Reaffirms Broad Scope of Bankruptcy Code’s Subordination of Shareholder Claims

by Jones Day on

Section 510(b) of the Bankruptcy Code provides a mechanism designed to preserve the creditor/shareholder risk allocation paradigm by categorically subordinating most types of claims asserted against a debtor by equityholders...more

Illinois District Court Maintains a High Threshold for Equitable Subordination of Insider Secured Loans

In In re SGK Ventures, LLC, Case No. 15 C 11224, 2017 WL 2683686 (N.D. Ill. June 20, 2017), Judge Durkin of the District Court for the Northern District of Illinois sets out a thorough analysis for addressing...more

United States Supreme Court to Decide Whether Recharacterization of Debt Should Be Decided by State or Federal Law

On June 27, 2017, the United States Supreme Court granted the petition for writ of certiorari regarding the decision In re Province Grande Olde Liberty, LLC, 655 Fed.Appx. 971 (4th Cir. Aug. 12, 2016) to decide a circuit...more

Could Supreme Court Case on Debt Recharacterization Provide a Pathway Out of the Stern v. Marshall Maze?

by Kelley Drye & Warren LLP on

The Supreme Court recently granted certiorari in PEM Entities LLC v. Levin, in which it will decide whether federal or a state law should apply when a debt claim held by a debtor’s insider is sought to be recharacterized in...more

Supreme Court To Hear Dispute Over Debt Recharacterization

One critical issue affecting complex restructuring cases are efforts by the estate or creditors to recharacterize debt into equity. This can happen in a variety of factual contexts, including where an existing equity...more

SCOTUS to Settle Circuit Split on Rule Applicable to Recharacterization of Debt to Equity Disputes

The Supreme Court has granted certiorari to decide the question of whether bankruptcy courts should apply state law or a federal rule of decision when determining whether to recharacterize a debt claim as a capital...more

IRS issues final debt-equity rules

by Dentons on

On October 13, 2016, the US Internal Revenue Service (IRS) released final and temporary regulations that recharacterize certain debt between related corporations as stock. These "debt-equity" regulations generally adopt in...more

Highly-Anticipated Final Regulations on Related-Party Debt Instruments Issued

by Shearman & Sterling LLP on

On October 13, 2016, the US Department of the Treasury and the Internal Revenue Service released final and temporary regulations under section 385 of the Internal Revenue Code (the “Regulations”) that contain rules requiring...more

CR&B Alert: Commercial Restructuring & Bankrtupcy News - October 2015, No. 3

by Reed Smith on

Welcome to the October 2015 issue of the CR&B Alert, the newsletter produced by Reed Smith's Commercial Restructuring & Bankruptcy Group. Readers who wish to print and read the newsletter in its entirety may do so by...more

In re Alternate Fuels, Inc.: Key Takeaways for Venture Capitalists Working with Emerging Companies

by Dorsey & Whitney LLP on

Venture capitalists (“VCs”) often provide needed debt financing such as bridge loans to emerging companies in financial distress. However, given their insider status with these companies, VCs may encounter issues with such...more

Delaware Bankruptcy Court Denies Derivative Standing to Creditor Seeking Recharacterization

by Cooley LLP on

In that case, Walnut Creek Mining Company (“Walnut Creek”), the debtor Optim Energy’s largest unsecured creditor, sought standing to pursue recharacterization, equitable subordination, and fiduciary duty claims on behalf of...more

Bankruptcy Court Shields Equity Sponsors Serving as Secured Lenders from Individual Creditor Seeking to Litigate Subordination and...

by Goodwin on

In a recent case — In re Optim Energy, LLC — the Delaware Bankruptcy Court denied an individual creditor’s request to pursue the subordination or recharacterization of the claims of secured lenders who were also the debtors’...more

The Ninth Circuit Recharacterizes Recharacterization Jurisprudence

by Mintz Levin on

The Ninth Circuit in In re Fitness Holdings Int’l, 2013 U.S. App. LEXIS 8729 (9th Cir. April 30, 2013) recently reversed precedent and established that bankruptcy courts in the Ninth Circuit have the power to determine...more

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