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It is generally recognized that a bankruptcy court has the power either equitable or statutory to recharacterize a purported debt as equity if the substance of the transaction belies the labels the parties have given it. A ruling handed down by the U.S. Bankruptcy Court for the Southern District of New York provides a textbook example of such a recharacterization. In
In re Live Primary, LLC, 2021 WL 772248 (Bankr. S.D.N.Y. Mar. 1, 2021), the court held that a purported loan made to a startup limited liability company by one of its members should be treated as a capital contribution because, among other things, the company was inadequately capitalized and the unsecured loan was not properly documented, bore a
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From left: Knotel’s Amol Sarva; Breather’s Bryan Murphy; WeWork’s Sandeep Mathrani and IWG’s Mark Dixon
Montreal-based Breather, a company that rents workspaces by the day, made a bold announcement last month that reverberated throughout the world of flex-office operators.
“Breather, in its current form as an operator, doesn’t make sense. And, to be frank, I’m not sure it ever made sense,” CEO Bryan Murphy told the Globe and Mail as he announced the startup would close all of its locations in the U.S., Great Britain and Canada.
Flex-office companies emerged from 2020 bruised and battered. But they say that whatever doesn’t kill you and, to be sure, some companies were dealt a fatal blow only makes you stronger.