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Bankruptcy Securities Litigation

The Intent of Section 546(e)

Will Reversing a Transaction ‘Seriously Upset The Securities Market’ Ability to Function’?

On Dec. 1, 2016, Bankruptcy Judge Michael J. Kaplan, 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."

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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).

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