Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Second Circuit Defines Adequate Capitalization

By Michael L. Cook
August 01, 2016

A debtor's pre-bankruptcy repurchase of its stock for $150 million was not a fraudulent transfer because the debtor “could have sold off enough of its assets or alternatively obtained sufficient credit to continue its business for the foreseeable future,” held the U.S. Court of Appeals for the Second Circuit on June 15, 2016. In re Adelphia Communications Corp., 2016 WL3315847, *2 (2d Cir. June 15, 2016). Affirming the lower courts, the Second Circuit stressed that “the issue of adequate capitalization,” the “sole issue presented on appeal ' came down to a battle of experts,” with the “defendants' experts” being “more persuasive.” Id. at *2.

Relevance

The creditors' “Recovery Trust” in Adelphia challenged the debtor's stock repurchase, made three years prior to bankruptcy, under the applicable Pennsylvania version of the Uniform Fraudulent Transfer Act (UFTA) because the transfer was made outside the relevant Bankruptcy Code reachback (Code ' 546 (a)(1)). As the Second Circuit noted, “Recovery Trust brought a claim under [Code] ' 544(b)[,] which allows it to avoid any transfer under applicable state law ' .” Id. at *1. Further, “courts construe [UFTA] consistently with the provisions of the Bankruptcy Code that address constructive fraudulent transfers ' .” For that reason, like the district court and the parties, it also relied on “decisions of other federal courts interpreting relevant provisions of the ' Code.” Id. See, e.g., In re Solomon, 299 B.R. 626, 633 (B.A.P. 10th Cir. 2003) (” ' the ' UFTA and ' 548 are identical and cases construing the elements under ' 548(a) are persuasive interpretations for the UFTA.”).

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Removing Restrictive Covenants In New York Image

In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?

Fresh Filings Image

Notable recent court filings in entertainment law.