Overview: The Fifth Circuit’s highly anticipated decision on December 31, 2024, in the Serta Simmons case has significant implications for borrowers and lenders in financial distress situations. The issue on appeal concerned an uptier transaction, a liability management exercise sometimes referred to as “lender-on-lender violence.” The Fifth Circuit’s opinion addresses the contractual viability of uptier transactions and the enforceability of related indemnities in bankruptcy plans, potentially reshaping the landscape for future financial restructurings.

Subchapter V of Chapter 11 of the Bankruptcy Code offers a streamlined and cost-effective path to reorganization specifically designed for small businesses. Unlike traditional Chapter 11 cases, Subchapter V lacks certain creditor protections, which can place creditors at a disadvantage. Key differences include the absence of a creditors’ committee, no requirement for a disclosure statement, and exclusive rights for the debtor to propose a plan. These changes aim to reduce costs and expedite the process but may limit creditors’ influence over the case outcome.

On November 22, the Securities and Exchange Commission (SEC) announced its enforcement results for fiscal year (FY) 2024. As compared to FY 2023, the Division of Enforcement (the division) reported a 26% decline in the total volume of enforcement actions filed, accompanied by a $3.2 billion increase in the orders obtained for financial remedies. Below is a high-level summary of the division’s FY 2024 statistics and key takeaways regarding the division’s substantive focus.

In a previous post, we discussed the Federal Deposit Insurance Corporation’s (FDIC) notice of proposed rulemaking aimed at enhancing recordkeeping for bank deposits received from fintech and other third-party, non-bank companies. The proposed rule initially set a public comment period ending on December 2, 2024. Yesterday, the FDIC announced a 45-day extension to this comment period, now allowing stakeholders until January 16, 2025, to submit their feedback.

When a customer files for bankruptcy, sellers may wonder if they can stop the shipment of goods. While the Bankruptcy Code does not explicitly permit this, the Uniform Commercial Code (UCC) provides guidelines under Sections 2-702, 2-703, and 2-705. Sellers can stop shipment if the buyer is insolvent or has failed to pay for the goods on time. However, they must instruct the carrier or bailee not to release the goods, and this instruction should be in writing.