Section 510(b) of the Bankruptcy Code expressly subordinates claims arising from the purchase or sale of a security in the debtor or an affiliate to the level of equity. It thus functions as a form of recharacterization. Despite its broad scope, § 510(b) is relatively underused, making it a potentially powerful tool for creative debtors, committees and trustees.

Private-equity funds typically provide capital to portfolio companies through equity infusions and debt financing depending on the fund’s investment strategy and the needs of the portfolio company.

The collapse of a business is traumatic for any owner-operator. They worry about their employees, damage to their reputations, and may well face an uncertain financial future. If the business was operated as a corporation, the failure of the company may have a devastating impact on the owner-operator, but she will not likely be compelled to repay compensation she received as an officer of the company prior to the filing.

In today’s corporate bankruptcy world, a debtor’s most important and valuable assets often come in the form of intellectual property (IP). Understanding the effect of bankruptcy on IP licenses is crucial not only for debtors, but also for existing licensees and for potential purchasers of IP assets.