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Showing 2 posts in Insolvency.

Continuous Insolvency Requirement and Irretrievable Insolvency Test Held By Delaware Chancery Court Inapplicable in Creditor-Derivative Claims

Quadrant Structured Prods. Co. v. Vertin, No. 6990-VCL, 2015 WL 2062115 (Del. Ch. May 4, 2015)

In this Opinion, Vice Chancellor Laster addressed two questions with respect to a derivative claim asserted by a creditor on behalf of a corporation – namely (1) whether such claims may be maintained only during the time that a corporation is actually insolvent and (2) whether to establish the insolvency of the corporation, such creditor must show that the corporation has “a deficiency of assets below liabilities with no reasonable prospect that the business can be successfully continued in the face thereof.”  Answering both questions in the negative, the Chancery Court held that a creditor will have standing to sue derivatively if it establishes that the corporation was insolvent at the time the derivative suit was filed and that insolvency may be proven under either one of the two traditional insolvency tests – the balance sheet test or the cash flow test. Read More ›

Court Addresses Standards for Insolvency, Piercing the Corporate Veil Under Delaware Law, Avoiding Alleged Fraudulent Transfers, and More

Burtch v. Opus, LLC (In re Opus East, LLC), Adv. Proc. No. 11-52423 (MFW), 2015 WL 1404959 (Bankr. D. Del. March 23, 2015)

In this Opinion, Judge Mary F. Walrath addressed 67 counts brought by a chapter 7 trustee (the “Trustee”) against former fiduciaries of the debtor and related business entities.  The Trustee alleged theories of piercing the corporate veil, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, successor liability, avoidance of fraudulent and preferential transfers, unjust enrichment, disallowance and equitable subordination of claims, revocation of certificate of dissolution, imposition of constructive trust, tortious interference with contract, conversion and conspiracy to commit conversion.  After trial on the merits, Judge Walrath granted partial judgment and pre-judgment interest in favor of the Trustee on certain fraudulent transfer and preferential transfer counts against two defendants, and granted related relief to allow the Trustee to revoke a certificate of dissolution against one of the affected defendants, and to disallow the claims of both affected defendants pursuant to section 502(d) and (j) of the Bankruptcy Code pending return of the avoided transfers. Judge Walrath granted judgment to defendants on the remaining counts. Read More ›