Executory Contracts and Leases in a Bankruptcy Case. Matthew P. Ward (302) September 10, 2013

Transcription

1 Executory Contracts and Leases in a Bankruptcy Case Matthew P. Ward maward@wcsr.com (302) September 10,

2 Provides the debtor with certain rights with respect to: 2

3 Provides the debtor with certain rights with respect to: Unexpired leases 3

4 Provides the debtor with certain rights with respect to: Unexpired leases Executory contracts 4

5 Provides the debtor with certain rights with respect to: Unexpired leases Executory contracts What is an unexpired lease? 5

6 Provides the debtor with certain rights with respect to: Unexpired leases Executory contracts What is an unexpired lease? One for which the term did not expire prior to the commencement of the bankruptcy case (section 365(c)(3)) 6

7 Provides the debtor with certain rights with respect to: Unexpired leases Executory contracts What is an executory contract? 7

8 Provides the debtor with certain rights with respect to: Unexpired leases Executory contracts What is an executory contract? The Countryman test: A contract under which the obligation of both [parties] are so far unperformed that the failure of either to complete performance would constitute a material breach excusing the performance of the other. Vern Countryman, Executory Contracts in Bankruptcy: Part I, 57 Minn. L. Rev. 439 (1973) 8

9 The debtor may: Bankruptcy Code Section 365 9

10 The debtor may: Bankruptcy Code Section 365 Assume (section 365(a)) 10

11 The debtor may: Assume (section 365(a)) Assume and assign (section 365(a) and (f)) 11

12 The debtor may: Assume (section 365(a)) Assume and assign (section 365(a) and (f)) Reject (section 365(a)) 12

13 Assuming the lease or contract: 13

14 Assuming the lease or contract: The debtor must first cure any default, or provide adequate assurance that it will cure any default (section 365(b)(1)(A)) 14

15 Assuming the lease or contract: The debtor must first cure any default, or provide adequate assurance that it will cure any default (section 365(b)(1)(A)) The debtor need not cure ipso facto defaults (section 365(b)(2)) 15

16 Assuming the lease or contract: The debtor must first cure any default, or provide adequate assurance that it will cure any default (section 365(b)(1)(A)) The debtor need not cure ipso facto defaults (section 365(b)(2)) The debtor also must provide adequate assurance of future performance (section 365(b)(1)(C)) 16

17 Assigning the lease or contract: 17

18 Assigning the lease or contract: The debtor may not assign a personal services contract, if the non-debtor party does not consent (section 365(c)(1)) 18

19 Assigning the lease or contract: The debtor may not assign a personal services contract, if the non-debtor party does not consent (section 365(c)(1)) The debtor may not assign a contract to make a loan or extend financing (section 365(c)(2)) 19

20 Rejecting the lease or contract: 20

21 Rejecting the lease or contract: If the debtor rejects the contract or lease, the non-debtor party gets a general unsecured claim (section 365(g)) 21

22 Rejecting the lease or contract: If the debtor rejects the contract or lease, the non-debtor party gets a general unsecured claim (section 365(g)) If the non-debtor is leasing space from the debtor, the nondebtor may stay on the premises and pay rent until the lease would otherwise have terminated (section 365(h)(1)(A)) 22

23 Other provisions: Bankruptcy Code Section

24 Other provisions: Bankruptcy Code Section 365 The debtor must continue to perform on a commercial property lease pending its decision whether to assume, assign, or reject (section 365(d)(3)) 24

25 Other provisions: Bankruptcy Code Section 365 The debtor must continue to perform on a commercial property lease pending its decision whether to assume, assign, or reject (section 365(d)(3)) The debtor has a 60 day reprieve for personal property leases (section 365(d)(5)) 25

26 Other provisions: Bankruptcy Code Section 365 The debtor must continue to perform on a commercial property lease pending its decision whether to assume, assign, or reject (section 365(d)(3)) The debtor has a 60 day reprieve for personal property leases (section 365(d)(5) Ipso facto provisions allowing the non-debtor to terminate the contract or lease generally are not enforceable (section 365(e)(1)) 26

27 About the Speaker MATTHEW WARD is a partner in the Bankruptcy and Creditors Rights practice group of Womble Carlyle, resident in the firm s Wilmington office. Matthew has represented numerous public and private companies as debtors, purchasers, secured lenders, and creditors in various Chapter 7 and Chapter 11 bankruptcy cases and adversary proceedings as well as in out-of-court acquisitions of distressed assets, and change of control transactions. He also regularly represents official committees of unsecured creditors in bankruptcy cases. Matthew is listed in SuperLawyers and is rated AV by Martindale-Hubbell. He also is a member of the American Bankruptcy Institute and the Delaware Bankruptcy Inns of Court. 27