Corporation liquidating trust

Liquidating trusts can be effective tools to wind down any business enterprise, including debtors in Chapter 11 bankruptcy cases and entities that dissolve outside of bankruptcy. To that end, in a Chapter 11 case, a debtor’s exclusive right to file a plan is limited to 120 days (subject to extensions for cause), but once a plan is confirmed, the bankruptcy estate ceases to exist and the debtor loses its status as debtor in possession, including its authority to act as a bankruptcy trustee and pursue estate claims. Norton Liquidating trusts are organized for the primary purpose of liquidating assets transferred to them for distribution to trust beneficiaries. The US Bankruptcy Code seeks to promote the effective administration and settlement of a debtor’s assets and liabilities within a limited frame of time.

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This is an appeal from a final judgment entered in the United States District Court for the Southern District of New York (Stanton, J.), dismissing on the pleadings a diversity action brought by plaintiff-appellant Am Base Corporation (“Am Base”) against defendants-appellees for indemnification of legal expenses incurred in a tax dispute with the Internal Revenue Service (“IRS”). Ch.2001) (“Delaware Action”), which was dismissed as time barred by Delaware's shorter statute of limitations. Between 19, the Trust distributed over 0 million in cash and assets to the former stockholders of City.This dispute concerned certain tax liabilities that allegedly were assumed by the predecessor corporation of defendant-appellee City Investing Company Liquidating Trust (the “Trust”). For the reasons that follow, we conclude that Am Base's claims are barred as a matter of law by the doctrine of res judicata. Certain directors and officers of City (“Trustee Defendants”) occupied certain fiduciary positions with both Am Base and the Trust.This is Am Base's second bite at the litigation apple, its first bite having been taken in an action filed in the Delaware Chancery Court, see Am Base Corp. And defendant-appellee Lester Mantell has served as a Trustee of the Trust since its creation, had been a senior City officer before the Am Base spin-off, and served in several officer positions (including Treasurer and Chief Financial Officer) at Am Base from prior to 1985 until December 1996. The relevant detail of this transaction was that City distributed the outstanding shares of Am Base to City's common stockholders.Notwithstanding the broad scope of the United States Bankruptcy Code and the power of the Bankruptcy Courts, there are still securities issues to be considered.

One possible component of a bankruptcy reorganization or liquidation is a liquidating trust.In conjunction with the other provisions of the Bankruptcy Code that require a disclosure statement and plan to provide “adequate information” for a claim or interest holder to make an informed judgment about the plan, Section 1123(b)(3) effectively provides notice to creditors of retention and prospective enforcement of claims that may enlarge the estate’s assets for distribution.A plan must expressly retain claims to preserve a liquidating trust’s standing to pursue them after plan confirmation. In 1985, as part of its dissolution and liquidation, City consummated a transaction pursuant to which it distributed out its assets and liabilities.While at Am Base, Mantell (a tax attorney) had significant responsibility for Am Base's tax matters. The Assignment of Certain Liabilities From City to Am Base Pursuant to an August 1985 Assignment Agreement, Am Base assumed certain liabilities of City in consideration for City's payment of 8,767,000 and the unwinding of certain debits and credits relating to intercorporate transactions.Absent this provision, a debtor would be required to investigate and prosecute all avoidance and other causes of action prior to confirming a plan, which may take years.