Linton Mann III and William T. Russell Jr. 'Adar Bays' Clarifies Usury Law Application
In this edition of their New York Court of Appeals Roundup, Linton Mann III and William T. Russell Jr. discuss 'Adar Bays v. GeneSys ID,' where the court recently clarified the application of state usury laws to corporations and to stock conversion options.
November 16, 2021 at 12:00 PM
6 minute read
The Court of Appeals recently clarified the application of state usury laws to corporations and to stock conversion options. In Adar Bays v. GeneSys ID, the U.S. Court of Appeals for the Second Circuit certified two questions to the court:
|- Whether a stock conversion option that permits a lender, in its sole discretion, to convert any outstanding balance to shares of stock at a fixed discount should be treated as interest for the purpose of determining whether the transaction violates N.Y. Penal Law §190.40, the criminal usury law [and]
- If the interest charged on a loan is determined to be criminally usurious under N.Y. Penal Law §190.40, whether the contract is void ab initio pursuant to N.Y. Gen. Oblig. Law §5-511.
962 F.3d 86, 94 (2020).
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