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Department of Labor Proposes Rule to Speed Distributions to Participants of Plans Sponsored by Bankrupt Companies
The U.S. Department of Labor’s Employee Benefits Security Administration announced a proposed rule that would expand its Abandoned Plan Program to include individual account plans, including 401(k) plans, of companies in Chapter 7 bankruptcy (a “Chapter 7 Plan”). Under the current rule, only large financial institutions and other asset custodians can serve as administrators of abandoned plans, and a plan is considered abandoned only after no contributions or distributions have been made for at least 12 months. Under the proposed rule, a Chapter 7 Plan would be considered abandoned on the date the plan sponsor’s bankruptcy proceeding commences. A bankruptcy trustee, or its designee, could then take advantage of the Abandoned Plan Program’s streamlined plan termination and benefit distribution procedures. As a result, plan participants would likely see fewer administrative and termination fees charged to their accounts and could receive benefit distributions more quickly. Additionally, the proposed rule permits a… Continue Reading
>Tip: Buying Video Game Assets Out of Bankruptcy
>Like many industries, the video game industry has seen a rise in Chapter 11 bankruptcy filings. Large corporate bankruptcy cases can be complicated and intimidating affairs, but for the savvy investor (or the savvy competitor), they can present tremendous opportunities. Traditionally, companies filed Chapter 11 to restructure their debt and emerge from bankruptcy as a more efficient going concern. It is becoming more common, however, for companies to file bankruptcy and quickly sell some or all of their assets and liquidate the remainder. These transactions are commonly referred to a “363 sales” (named after the applicable Bankruptcy Code section). Such sales can involve any asset of a bankrupt company, including intellectual property rights, and a prospective buyer has an opportunity to acquire a desired asset at a discounted price. However, because of the particularities of the bankruptcy proceeedings, there are some choppy waters that a prospective buyer needs to successfully… Continue Reading
>Tip: Source Code Escrow — Saving Your Game…Literally
>Ascaron Entertainment’s new action RPG, “Sacred 2: Fallen Angel,” has sold over 400,000 copies worldwide, is topping international PC sales charts, and is about to see release on Xbox 360 and PS3. Nevertheless, the German game development studio went into administration a week ago in order to obtain the protection of German insolvency laws. Ascaron’s press release cites development delays associated with Sacred 2 as the reason for its decision to enter banruptcy and reorganize. Ascaron’s announcement officially puts a “game developer FAIL” trifecta into play for early 2009. Midway Games announced, in February, that it had filed a voluntary petition for bankruptcy under U.S. law after a late-2008 change in ownership triggered financial obligations that the company was “unable to satisfy.” Midway anticipates that its operations will continue ininterrupted, but one has to wonder: what would happen if the next installation of Unreal Tournament or Mortal Kombat (Midway’s flagship… Continue Reading
>Tip: Bankruptcy — The Economy Says You Can’t Ignore It
>Ok… who remembers this: Up, Up, Down, Down, Left, Right, Left, Left, B, A, Start? The hard-core (old-school) gamers should instantly spot the typographical error in this classic Contra cheat code. Many legal commentators believe section 365 of the United States Bankruptcy Code contains such a mistake, as well, which could have significant ramifications on intellectual property licenses entered into between developers and publishers. Section 365 permits bankrupt companies to (i) assume contracts (meaning to retain the benefits and obligations as if the bankruptcy never occurred); (ii) assume and assign contracts to third parties or (iii) reject most types of contracts. The ability to pick and chose which contracts to keep, which to sell, and which to dismiss is a critical element of most successful reorganizations. A potential problem arises with Section 365 with respect to contracts that are not assignable under non-bankruptcy law (and one major category of such… Continue Reading
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