Storm Warning For Section 546 'Safe Harbor'

Law360, New York (February 4, 2014, 2:10 PM EST) -- Section 546(e) of the Bankruptcy Code limits the ability of a trustee or debtor-in-possession to avoid as a constructive fraudulent transfer or preferential transfer a transaction in which the challenged settlement payment was made through a stockbroker or a financial institution.

Because of the broad protection granted by Section 546(e) — the so-called “safe harbor” provision — parties structuring a leveraged buyout (LBO) or similar transaction often ensure that settlement funds flow through one of the listed institutions to inoculate the beneficiaries from a later challenge...
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