Delaware Court Upholds Receiver’s Decision to Include Bidder in Auction Despite Alleged Information Advantage

By Patrick Maney on June 18, 2026 Posted in US

B.E. Capital Management Fund LP v. Fund.com Inc., C.A. No. 12843‑JTL (Del. Ch. Apr. 10, 2026)

INTRODUCTION

Can a successor receiver let a past receiver, removed for being a “faithless fiduciary,” bid to buy company assets at auction? In B.E. Capital Management Fund LP v. Fund.com Inc., the Delaware Court of Chancery (the “Court”) highlighted the deference courts give to receivers when making ordinary-course-of-business decisions and provided a thoughtful discussion of auction “game theory.” For creditors, equity holders, receivers, and bidders alike, this decision provides important guidance on how courts evaluate a receiver’s decision-making, and when they will decline to intervene.

BACKGROUND

Fund.com Inc. (the “Company”) is a defunct company subject to receivership in Delaware. The Court originally appointed Thomas Braziel as the receiver, but he was adjudicated as a “faithless fiduciary,” which, under Delaware law, means that Braziel was acting to advance his own personal interest rather than the Company’s. The Court replaced Braziel with a successor receiver (the “Receiver”). The Company had certain claims against another company subject to liquidation in New Zealand (the “Assets”), which Braziel had helped to recover for the Company. Subsequently, when the Receiver sought to sell the Assets at auction, the Receiver permitted Braziel to participate as a bidder.

Another bidder objected to Braziel’s participation in the auction. The bidder alleged that Braziel had “an informational advantage over other bidders concerning the Assets.” The objector contended that Braziel had “superior knowledge” of the assets and that there were “gaps in the due diligence information available to other bidders about some of the actions Braziel took that could affect the value of the [a]ssets.” The objector further contended that because of Braziel’s superior knowledge, he could “better assess risk than other bidders” with respect to the Assets.

STANDARD OF REVIEW

As a threshold matter, the Court addressed the standard of review applicable to the Receiver’s decision to permit Braziel to participate in the auction. The Court explained that, when a court appoints a private individual to act as a receiver, the default standard of review is de novo unless otherwise specified in the order appointing that receiver. However, “business-oriented and judgment-laden decisions” are different. Here, the Court reasoned that a similarly situated (i.e., disinterested and independent) board of directors would “enjoy the protections of the business judgment rule” and that a “comparable standard of review should therefore protect the Receiver’s decision.” The Court therefore determined that it should examine the Receiver’s decision under the far more deferential “abuse of discretion” standard.

INFORMATION ASYMMETRY AND GAME THEORY

The Court’s discussion about the effect of Braziel’s participation centered around two conflicting ideas. First, letting Braziel participate could be in the best interests of the company if he could pay the highest price. Second, however, Braziel’s participation may impair the sale process due to his insider knowledge.

When a party with an informational advantage competes against a less-informed party, the less-informed party risks “the winner’s curse.” That is, when a less-informed party wins an auction against a better-informed party, the less-informed party pays more than the better-informed party believes the asset is worth. It follows that when a less-informed party wins an auction, they have likely overpaid. Auction participants understand this, and the effect is that less-informed parties tend not to participate in auctions with better-informed parties. For instance, the objector in this case refused to participate if Braziel was permitted to bid on the assets.

So, the Receiver found himself in a catch 22. If Braziel’s informational advantage drove away all the other bidders, then he might be able to buy the assets at a steep discount. However, by excluding Braziel, the Receiver risked losing the potential highest bidder.

DEFERENCE TO THE RECEIVER’S JUDGMENT

Because the Receiver was protected by the business judgment rule, the Court applied the “abuse of discretion” standard and ultimately held that the Receiver could include Braziel in the auction. In making this decision, the Court highlighted that the Receiver did not need to design a perfect auction (e.g., running a “first-price-sealed-bid” auction instead of an “English” auction). Instead, the Receiver only needed to design an auction that fell “within a range of reasonableness.” As noted by the Court, what typically causes a decision to fall outside this range is “the presence of self-interest that taints the fiduciaries’ judgment.” Without such a taint of self-interest, courts defer to the “thoughtful, informed judgments that disinterested and independent fiduciaries make.” Because the Receiver was disinterested and independent, the Court deferred to the Receiver’s judgment. The Court reasoned that “[i]ncluding Braziel present[ed] a combination of risks and benefits. So d[id] excluding him. Neither choice constitute[d] an abuse of discretion.”

CONCLUSION AND KEY TAKEAWAYS

In sum, this case is instructive, holding that disinterested, independent receivers will receive the protection of the business judgment rule when conducting auctions. Courts will defer to receivers’ decisions, absent evidence of abuse (i.e., self-dealing), and courts will not micromanage a receiver’s auction design, even if the receiver does not design a perfect auction. For more protection, creditors can try to request a heightened standard of review in the court’s order to appoint a receiver which empowers the court to be less deferential to the receiver.

Court of Appeal Refocuses the s.238 Test: Identifying the Real Transaction (UK)

By Julia Koziel and Samuel Baines on June 9, 2026 Posted in UK

The Court of Appeal’s recent judgment in TAQA Bratani Limited (“TAQA”) & Others v Fujairah Oil & Gas UK LLC & Others [2025] EWCA Civ 1669 provides clarity on how the Court will approach the question of whether a transaction, is a transaction at an undervalue caught under s.238 of the Insolvency Act 1986 (“Act”). In overturning the High Court decision, the Court of Appeal has clarified the limits of the s.238 jurisdiction, the scope of the statutory ‘good faith’ defence pursuant to s.238(5) of the Act, and the circumstances in which surrounding commercial arrangements can (and cannot) be treated as consideration.

Amendments to the Insolvency Rules Provide Welcome Clarification (UK)

By Rachael Markham on June 3, 2026 Posted in UK

Ahead of the Insolvency Rules Review expected this summer, the Insolvency Service have published a new statutory instrument (SI) that will come into force on 22 June. This seeks to tidy up a few of the “niggles” found in the Insolvency Rules 2016 (Rules) that have caused practitioners a headache, as well as making a change to r18.30 regarding approval of remuneration and a few minor tidy ups alongside those.

What are the key changes?

HMRC versus Restructuring Plans (UK)

By Rachael Markham on May 26, 2026 Posted in UK

When Waldorf Production UK Plc returned to court with its second restructuring plan in a year, the primary opposition it faced was from HMRC who voted against the plan. Mr Justice Green ultimately sanctioned the plan, cramming down the liabilities owed to HMRC but the judgment provides some helpful insight into the position taken by HMRC and is helpful more generally in framing the approach and considerations for other plan proponents when dealing with HMRC as a creditor.

Why Was a Restructuring Plan Proposed?

Waldorf’s liquidity issues were largely driven by Energy Profits Levy (EPL) liabilities which exceeded £69 million. Following Waldorf’s failed restructuring plan in 2025, this second plan, and the success of it, relied on an offer by Harbour Energy to buy most of the group for US$205 million. However, the offer to buy was premised on the the EPL liabilities being compromised.

Waldorf represented that if the plan was not approved a formal insolvency was likely (the Relevant Alternative) in which unsecured creditors—including HMRC—would receive around 0.1% of their claims. Under the plan, HMRC would however receive 14% of its claim.

HMRC voted against the plan, but with other creditors supporting it, the Court had to consider at the sanction hearing, whether to exercise its discretionary power to cram down the plan on HMRC in the face of its opposition. Why did HMRC oppose the plan?

Can Cannabis Companies File Bankruptcy? The New Chapter 15 Roadmap

By Mark Salzberg and Katherine Catanese on May 19, 2026 Posted in US

Have the doors to U.S. Bankruptcy courts finally swung open to cannabis companies? Perhaps, but still in only very limited circumstances involving a foreign debtor. Nonetheless, Judge Brendan Shannon’s recent order granting recognition of a Canadian insolvency proceeding [1] filed by a cannabis company is the first crack in the door that many bankruptcy professionals have been waiting for and may provide a roadmap for future cannabis restructurings in the U.S.

(UK) IPs with residential tenanted properties on your cases – have you sent an Information Sheet to tenants? Time is running out

By Rachael Markham on May 13, 2026 Posted in UK

The Renters Rights Act 2025 (Act), which came into force on 1 May 2026 aims to give private tenants greater security and protection from eviction, in many respects aligning the position with business tenants who are in occupation under a protected business tenancy.

For insolvency practitioners (IPs) appointed as administrators or liquidators of a business with real estate assets that have residential tenants in situ, the changes introduced by the Act are important to understand, not least because they enhance the rights of tenants, change the grounds on which a landlord can obtain possession of a property and place new or additional obligations on a landlord.

Revisiting Limitation Periods in Insolvency Claims Post Zedra

By Kathryn Griffiths on May 11, 2026 Posted in UK

Whilst the Supreme Court’s decision in THG Plc v Zedra Trust Company (Jersey) Ltd [2026] UKSC 6 provides clarity on the application of limitation periods in unfair prejudice claims, it raises fresh questions for certain insolvency claims that have traditionally been thought to have limitation periods.

Building Liability Orders: Group Exposure, Insolvency and Legacy Building Safety Claims

By Paul O’Kane on April 30, 2026 Posted in UK

The Building Safety Act 2022 introduced sweeping changes to address this country’s building safety failures exposed by Grenfell. One of its most significant and arguably most revolutionary remedies introduced by the Act is the Building Liability Order, or BLO, designed to prevent relevant building safety liabilities being left behind in undercapitalised project companies while associated companies remain beyond reach.

In broad terms, a BLO allows the High Court to make one company jointly and severally liable for certain building safety liabilities of another company in the same corporate group or association structure where it is “just and equitable” to do so. That matters because development and construction projects are routinely carried out through special purpose vehicles or specialist operating companies with limited covenant strength. The BLO regime is intended to prevent relevant building safety liabilities from being stranded in those entities where associated companies remain within reach.

The decision in Crest Nicholson Regeneration Ltd & Ors v Ardmore Construction Ltd (In Administration) & Ors [2026] EWHC 789 (TCC) is therefore important. It is only the second case to consider the “just and equitable” test for a BLO and it does so in the context of a contractor in administration. Crest sought both an anticipatory BLO and an adjudication BLO following an adjudication award of around £14.9 million against Ardmore Construction Ltd.

Purdue Doesn’t Stop Chapter 15 Recognition and Enforcement of Third-Party Releases

By Jeffrey N. Rothleder on April 17, 2026 Posted in Cross Border, US

The U.S. District Court for the District of Delaware has issued a significant ruling in the cross‑border insolvency practice that reaffirms U.S. recognition of foreign restructuring plans containing third-party releases.

Crédito Real S.A.B. DE C.V., SOFOM, E.N.R. (“Crédito Real”) was one of Mexico’s largest non-banking financial lending institutions. In 2021, Crédito Real experienced a liquidity crisis and commenced negotiations with its creditors. The negotiations, which were long and drawn out, ultimately resulted in a restructuring support agreement (the “RSA”). The RSA provided for, among other things, a prepackaged restructuring proceeding in Mexico under Mexican law and recognition of that proceeding and the approved restructuring plan in the U.S. under Chapter 15 of the Bankruptcy Code. Under the Mexican proceeding, Crédito Real obtained court approval of its restructuring plan (the “Plan”). The Plan, which was supported by the creditors, contained releases of third-party claims and causes of action as permitted under Mexican law (the “Release”).

Defects in Administration Appointments and Extensions – Assume the worst and remedy on that basis?(UK)

By Rachael Markham on April 9, 2026 Posted in UK

There is something to be said for “assume the worst” when it comes to defects in administration appointments and extensions. The court has taken this approach in a few cases where, rather than trying to work out the intricacies and effect of a defect on an appointment or extension, it has assumed the worst (i.e invalidity) and made a retrospective order to remedy the position.

There is much to be said for this approach, which stems from the Bradford Bulls case – saving time and cost in working out whether a defect has caused an invalid appointment or extension, and proceeding on the assumption it does.

In the case of Quantuma Advisory Limited and others v Colin Mear Ltd and another [2025] EWHC 3580 (Ch) the court was asked to not only confirm the validity of the original appointment but also to make a “Bradford Bulls Order” in light of potential defects with the administration extensions.

The applications in this case concerned two companies that had been placed into administration by their directors – Colin Mear Ltd and Colin Mear Engineering Ltd. Both companies had a qualifying floating charge holder (QFCH) which at the date of appointment of administrators was in liquidation and Irish liquidators had been appointed.