the obligation to return to a Fund distributions previously received from the Fund. This is sometimes used to refer to the obligation of a Fund Manager to return excess Performance Fee distributions, which can occur when markets or investment outcomes are strong in the early years of the life of a Fund and weak in later years. This is also used to refer to the obligation of Fund investors to return distributions previously received if the Fund requires those amounts to meet its expenses or liabilities. In the Bankruptcy context, if a creditor receives assets or payments from a debtor during the 90-day period (or one year period in the case of insiders) prior to the date the debtor files a Bankruptcy petition or obtains a Fraudulent Transfer from the debtor prior to the Bankruptcy petition, a Bankruptcy court can require that such creditor return those assets or payments that are determined to be preferential transfers or Fraudulent Transfers. This is known as the Bankruptcy court exercising its “clawback powers.” The creditor may be able to assert a defense against a Preference, such as by demonstrating that it gave “new value” to the debtor in exchange for the assets or payments received or that the debtor made the payment in the ordinary course of business.
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