St. John's University; Flushing, N.Y.
The Bankruptcy Code strives to reach a balance between giving the debtor flexibility in making daily business decisions while at the same time limiting those activities which are deemed to be outside the ordinary course of business. [1] This limitation generally comes in the form of judicial oversight. Indeed, courts exercise varying degrees of scrutiny depending on the applicable Code provision. Curiously, one area where courts are using different standards of relief within the same provision is § 503(c)(3):[2] Some courts make an independent determination while others use the business-judgment test as the standard for granting relief under § 503(c)(3). Recently, the U.S. Bankruptcy Court for the Northern District of Texas, in In re Pilgrim’s Pride Corp.,[3] confronted this wavering standard in evaluating the propriety of consulting agreements between a debtor and former executives, and held that an independent court determination is the proper standard under § 503(c)(3). [4]
This article will first discuss the relevant Code provisions involved with insider compensation motions and the In re Pilgrim’s Pride decision, then it will assess the two standards of review under § 503(c)(3) and the policy implications of both approaches.
Motors Liquidation Company; Detroit
Section 505 of the Bankruptcy Code allows trustees of debtor companies the opportunity to have a bankruptcy court potentially determine the amount of all tax liabilities during the course of a bankruptcy case. Section 505(b) also enables trustees to accelerate the resolution of tax issues, bring certainty in the amount of tax the estate may owe and close the of statute of limitations years ahead of schedule. Perhaps the most important advantage of using this provision is that it could eliminate any lingering trustee, officer and director liability in an expedited fashion. The benefits available under § 505(b) should encourage trustees and others to consider using this rather straightforward procedure in the administration of bankruptcy cases.
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