September 01, 2017

MONTH-IN-BRIEF: Bankruptcy & Finance

Penelope Christophorou, Taryn Darling

Commercial Finance

ULC Adopts Uniform Regulation of Virtual Currency Businesses Act

By Pamela J. Martinson, Sidley Austin LLP

At its annual meeting in San Diego in July, the National Conference of Commissioners on Uniform State Laws approved and recommended for enactment in all the states a model act providing a framework for the regulation of businesses that exchange, store, or transfer virtual currencies, such as bitcoin, with or on behalf of consumers. A number of states, including New York and California, have or are considering laws to regulate these businesses, and existing state money transmission laws may also apply, leading to a great deal of uncertainty that negatively impacts investment and innovation in the area. The uniform law offers clear guidelines on activities that are regulated and those that are excluded from regulation, and provides for both reciprocity between states and an “on-ramp” to full registration for emerging companies. Significantly, the model act includes a minimum net worth requirement, and clarifies that the virtual currency held by an intermediary is not reachable by that intermediary’s creditors, providing important protections for owners of virtual currency. The next step is for the model act to be introduced in each state and considered for adoption.

Delaware Supreme Court Backs Deference to Deal Price

By K. Tyler O’Connell, Morris James LLP

In DFC Global Corp. v. Muirfield Value Partners, L.P., (Del. Aug. 1, 2017), the Delaware Supreme Court clarified when, in an appraisal action to value stockholders’ shares, the court should defer to the sale price. DFC Global Corp., a public company, was sold to a private equity buyer following an open, conflict-free sale process. In valuing the company, the trial court gave the deal price only one-third weight due to DFC’s uncertain regulatory environment and financial buyers’ need to achieve high internal rates of return. The Supreme Court reversed and remanded, reasoning that economic principles strongly support that the market price derived from a fulsome sale process should receive greater weight in determining fair value. The Court may soon provide further guidance on this topic in the pending appeal of In re: Appraisal of Dell Inc., (Del. Ch. May 31, 2016).

Bankruptcy Law

Third Circuit Clarifies When Businesses Must Notify of Pending Layoff under the WARN Act 

by Michael Enright, Robinson & Cole LLP

The U.S. Court of Appeals for the Third Circuit recently clarified when a business must notify employees of a pending layoff under the WARN Act. Although the “unforeseeable business circumstances” exception excuses noncompliance with the 60-day advance notice required by WARN, uncertainties remain about the scope of the exception. In re AE Liquidation, Inc., (3d Cir. Aug. 4, 2017) held that the probability of a layoff, not simply the possibility of one, triggered the notice requirement. To comply, employers relying on the exception still must provide actual notice when “probability” arises, even though giving less than 60 days’ notice.

Penny Christophorou

Counsel; Cleary Gottlieb Steen & Hamilton LLP

Penelope L. Christophorou’s practice focuses on commercial financing, including secured transactions and bankruptcy law, derivative products, and structured finance. She represents leading financial institutions, corporate borrowers, private investment funds and sovereign clients on these matters.

Taryn Darling

Board Member, William H. Dwyer Inns of Court

Taryn began her career as a bankruptcy lawyer almost ten years ago. Her practice includes reorganization, insolvency, receivership, work-outs, and bankruptcy and all related litigation. Taryn has litigated at the trial level and appellate level on behalf of her clients in a number of adversary proceedings and in consumer protection litigation. Taryn’s clients include individuals, business owners, and closely held corporations and businesses. Her breadth of experience in the area of bankruptcy and insolvency enables her to take a preventive approach when clients come to her at the outset of a problem. Taryn develops creative solutions to mitigate the impact or consequences when it becomes clear that a bankruptcy or receivership is the best course of action.