Bankruptcy and the New Uniform Special Deposits Act: Insulating Depositor Funds From the Reach of Most Creditors
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Bankruptcy
- event Date
Thursday, July 18, 2024
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE webinar will review the Uniform Special Deposits Act (SDA), a new state law promulgated by the Uniform Law Commission and recommended for enactment nationwide. Special deposits can serve an important function in commerce and industry by affording safety and security to the funds deposited in such an account. Regrettably, the current common law of special deposits has been fraught with ambiguities and inconsistencies which have undermined the utility of the device. The panel will discuss the legal uncertainties and the four “mischiefs” which have plagued the common law of special deposits for many years and how the SDA will clarify the law and remedy those mischiefs. The panel will also explain why the SDA is of tremendous benefit and significance to bankruptcy practitioners and secured lenders. Among other provisions, the panel will review the “opt-in” feature of the law and the special choice of law and forum selection rules.
Mr. Harbour regularly represents all major constituencies in formal bankruptcy proceedings and in out-of-court restructurings. His experience includes representing corporate debtors, secured and unsecured creditors, parties to safe harbored financial contracts, indenture and securitization trustees, lessors, and other parties in interest in Chapter 7, Chapter 11 and Chapter 15 bankruptcies, and in workouts. Mr. Harbour’s practice also focuses on providing insolvency-related structuring advice and legal opinions in connection with complex transactions for asset based-lending, asset securitizations, safe harbored financial contracts, conduits, derivatives and other financial hedges, project finance, REITS, REMICS, real estate finance and other capital markets transactions.
Mr. Guida is part of the firm’s banking and finance, business law, and real estate law teams. He has been providing legal services to institutional banking clients throughout New England for more than three decades, and previously served as in-house counsel for two major banks. Mr. Guida is known for his precision in complex financing transactions, often representing institutional lenders and borrowers — including major banks — in deals involving historic redevelopment, economic development bonds, affordable housing, and private business acquisition and expansion. He has established a special expertise in the financing of healthcare provider transactions. Mr. Guida is experienced in sophisticated syndicated and participated deals, representing lead and agent bank lenders. He also represents major real estate developers in their project development, permitting, borrowing and leasing transactions, including major development projects within the Capital Center District in downtown Providence. Mr. Guida brings to the table a wealth of alternative financing options that help divergent parties reach mutually beneficial accord and compromise during the negotiation process.
He specializes in banking and financial institutions law, representing domestic and foreign commercial banks, investment banks and insurance companies. He leads the firm’s Financial Institutions Group which has a long history advising global financial institutions on their largest transactional and their most sensitive regulatory matters.
Special deposits are accounts established and funded by a depositor with a depository bank for a “permissible purpose” and only payable to one or another of at least two (2) potential beneficiaries upon the occurrence of a stated contingency set forth in a written special deposit account agreement. Special deposits are highly beneficial to protect funds in a variety of transactions including real estate sales, business mergers and acquisitions, litigation and arbitration settlements, distribution of tenant security deposits, distributions of funds in class action settlements, settlement of payment systems and more. These special deposits are not used more frequently today because of so many uncertainties about everything from how to establish them to what protections they have.
Under the uniform SDA law, which the American Bar Association, the American College of Commercial Finance Lawyers and the New York City Bar Association Committee on Commercial Law and Uniform State Laws have all endorsed, a special deposit meeting the SDA's requirements would be protected against claims asserted against the deposit in a bankruptcy proceeding, creditor process and even the depository bank’s right of setoff and recoupment, in each case pending the determination of the contingency and hence the beneficiary or beneficiaries entitled to payment.
The SDA also carefully protects the special deposit from being used for a fraudulent purpose.
It will be important for bankruptcy attorneys and attorneys for lenders with Article 9 security interests in deposit accounts to understand enforcement limitations with respect to special deposit accounts and the limits on set-off and recoupment rights.
Listen as the panel of expert banking, bankruptcy and lender attorneys reviews the SDA and gives attendees a head start on understanding this new law.
- SDA history and objectives
- Key provisions
- Impact on bankruptcy
- Enactment
The panel will review these and other key issues:
- What are the “Four Mischiefs” which the SDA resolves?
- What types of transactions would benefit from utilizing the special deposit device?
- What happens when the funds in the special deposit account are insufficient to satisfy the contingency?
- How do the choice of law and venue provisions of the SDA apply?
- How would the SDA's venue provisions mesh with the Bankruptcy Code's venue provisions?
- What are permissible purposes for special deposit accounts?
- How will special deposit accounts be treated in bankruptcy?
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