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It is generally recognized that a bankruptcy court has the power either equitable or statutory to recharacterize a purported debt as equity if the substance of the transaction belies the labels the parties have given it. A ruling handed down by the U.S. Bankruptcy Court for the Southern District of New York provides a textbook example of such a recharacterization. In
In re Live Primary, LLC, 2021 WL 772248 (Bankr. S.D.N.Y. Mar. 1, 2021), the court held that a purported loan made to a startup limited liability company by one of its members should be treated as a capital contribution because, among other things, the company was inadequately capitalized and the unsecured loan was not properly documented, bore a
Bankruptcy Court Recharacterizes Purported Loan As Equity - Insolvency/Bankruptcy/Re-structuring mondaq.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from mondaq.com Daily Mail and Mail on Sunday newspapers.