Non-Statutory Insiders under the Bankruptcy Code after U.S. Bank National Association v. the Village at Lakeridge, LLC
Document Type
Article
Publication Date
2021
Excerpt
Insiders have motive and means to plunder their firm. They are in a position to enrich themselves at the expense of the firm's creditors. Title 11 of the United Sates Code (the "Bankruptcy Code") therefore singles them out for closer scrutiny and more exacting treatment. Whether an entity is an insider of a firm in bankruptcy is a critical determination under a score of Bankruptcy Code provisions, from how many creditors are needed to file an involuntary petition to whose votes count in determining whether a reorganization plan can be confirmed. Insiders are subject to a longer preference period and to heightened scrutiny for equitable subordination of their claims. Their votes do not count in electing a chapter 7 trustee, and they may not be employed as professionals representing a trustee or chapter 11 debtor in possession. "Insider" is a defined term in the Bankruptcy Code. The problem is that the definition is not exclusive. It "includes" a list of enumerated persons and entities- referred to as "statutory insiders." But other, non-enumerated persons and entities may also be insiders-known as "non-statutory insiders."
Recommended Citation
Scott F. Norberg, Non-Statutory Insiders under the Bankruptcy Code after U.S. Bank National Association v. the Village at Lakeridge, LLC, 29 AM. BANKR. Inst. L. REV. 83 (2021).
