United States:
The Supreme Court Narrows The Bankruptcy Code Safe Harbor For Securities Transaction Payments
20 August 2018
Hogan Lovells
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The Supreme Court, in Merit Management Group, LP v. FTI
Consulting, Inc., 138 S. Ct. 883 (2018), recently resolved a
circuit split in the interpretation of the Bankruptcy Code's
safe harbor provision. The Court held that section 546(e) does not
protect transfers made through a financial institution to a third
party regardless of whether the financial institution had a
beneficial interest in the transferred property. Instead, "the
only relevant transfer for purposes of the safe harbor is the
transfer that the trustee seeks to avoid." This decision will
have implications for companies pursing leveraged buyout
transactions.
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