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The Intent of Section 546(e)
On Dec. 1, 2016, Bankruptcy Judge Michael J. Kaplan, in Christophersen v. Pahel (In re TVGA Engineering, Surveying, P.C.), 14-1104 (K) (Bankr. W.D.N.Y. Dec. 1, 2016), held that when a private company repurchases stock from a shareholder, and the payments were made “by” the company “to” the shareholder, through a bank, those payments are not protected by Bankruptcy Code § 546(e)'s safe harbor defense because its application “cannot be permitted to turn upon the use of a bank.” In re TVGA Engineering, Surveying, P.C., 14-1104 (K) p.5 (Bankr. W.D.N.Y. Dec. 1, 2016).
Judge Kaplan relied on legislative intent to find that a transaction which potentially falls within the safe harbor protections of 546(e) should not be afforded the benefits of the safe harbor defense because it is between private parties, is truly “by” the debtor and “to” the transferor, merely uses a financial institution like cash and, perhaps most important, if reversed, would not likely “seriously upset the securities market's ability to function.”
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