11 U.S.C. § 747: Subordination of certain…

Summary

Except as allowed under section 510, a trustee cannot pay any customer's net equity claim, even partly, until every other customer's net equity claims have been paid in full. This rule applies to customers who were insiders; anyone owning 5% or more of a class of the debtor’s stock (except nonconvertible preferred stock with fixed dividend/liquidation rights or limited-partner interests); limited partners with a 5% or greater share of net assets or profits; or any entity that controlled the debtor.

Title 11, §747

Bankruptcy, Source: USLM XML via OLRC

Except as provided in section 510 of this title, unless all other customer net equity claims have been paid in full, the trustee may not pay in full or pay in part, directly or indirectly, any net equity claim of a customer that was, on the date the transaction giving rise to such claim occurred—

(1)an insider;

(2)a beneficial owner of at least five percent of any class of equity securities of the debtor, other than—

(A)nonconvertible stock having fixed preferential dividend and liquidation rights; or

(B)interests of limited partners in a limited partnership;

(3)a limited partner with a participation of at least five percent in the net assets or net profits of the debtor; or

(4)an entity that, directly or indirectly, through agreement or otherwise, exercised or had the power to exercise control over the management or policies of the debtor.

Notes & Related Subsidiaries

Historical and Revision Notes

senate report no. 95–989

section 747 subordinates to other customer claims, all claims of a customer who is an insider, a five percent owner of the debtor, or otherwise in control of the debtor.

Editorial Notes

Amendments

1982—Pub. L. 97–222 substituted “the transaction giving rise to such claim occurred” for “such claim arose” in provisions preceding par. (1).

§747 Subordination of Certain Customer Claims