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Involuntary Bankruptcy: Limited Remedy and Strong Sanctions for Abuse
July 2019
The remedy of involuntary bankruptcy “exists as an avenue of relief for the benefit of the overall creditor body …. [I]t was not intended to redress the special grievances, no matter how legitimate, of particular creditors ….” In re Murray, 900 F.3d 53, 59-60 (2d Cir. 2018). The courts of appeals have been consistent. A bankruptcy court decision recently detailed how courts applying Bankruptcy Code (Code) § 303(i) can sanction creditors who “abuse … the power given to [them] … to file an involuntary bankruptcy petition.” In re Anmuth Holdings LLC, 2019 WL 1421169, at 1 (Bankr. E.D.N.Y. Mar. 27, 2019). Because the three involuntary petitions against corporate entities in Anmuth admittedly “lacked any merit,” Id. at 12, the court ultimately awarded the debtors attorneys’ fees, punitive damages, retroactive dismissal of the involuntary petitions to the dates on which they were filed, and an injunction against future filing by the petitioning creditors. Id. at 27. In this article, of counsel Michael Cook discusses the court’s decision and why the filing of an involuntary bankruptcy requires careful pre-filing legal judgment.
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Alerts
The US Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) have overhauled Form PF and private fund managers have until March 12, 2025, to begin reporting on the new Form. The changes to the reporting requirements mandated by the amendments to the Form (“Form PF Amendments”) will require substantial preparation by many managers.[1]
Alerts
On March 1, 2024, New York Governor Kathy Hochul signed into law an amended version of the New York LLC Transparency Act (“NYLTA”),[1] requiring certain limited liability companies (“LLCs”) formed or authorized to do business in New York (each, a “NY Reporting Company”) to file a beneficial ownership information (“BOI”) report with the NY Department of State (“NY DOS”). Each NY Reporting Company will be required to disclose on its BOI report identifying information pertaining to each individual who directly or indirectly exercises substantial control or owns or controls 25 percent or more of the ownership interests of a NY Reporting Company (each, a “Beneficial Owner”) and the individuals involved in the NY Reporting Company’s formation or registration to do business in New York (each, an “Applicant”). Information reported to NY DOS will be maintained in a private database not accessible to the public. The NYLTA goes into effect on Jan. 1, 2026 and requires the NY DOS to promulgate regulations implementing the legislation.
Alerts
The US Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) have overhauled Form PF and private fund managers have until March 12, 2025, to begin reporting on the new Form. The changes to the reporting requirements mandated by the amendments to the Form (“Form PF Amendments”) will require substantial preparation by many managers.[1]