Business Bankruptcy

Author’s Note Appellate rulings in a California bankruptcy case have the potential to upend a bedrock principle of Subchapter V plans. After an apparel company filed for Chapter 11 under Subchapter V because of a judgment it could not pay, its plan to reorganize has bounced between bankruptcy court and the district court since 2020. While the bankruptcy court supports the debtor’s use of Subchapter V’s unique provisions favoring debtors and equity holders, the district court has taken a more creditor-centric view and blocked its plan twice. While thousands of […]

When Corporate Attorney-Client Communication Is No Longer a Secret Imagine if every secret and strategy that you had ever shared with your attorney were laid open for the world to see. A trustee in a business bankruptcy case may well have the power to review, publish, and wield all of the debtor’s attorney-client communication, including those communications that the debtor’s principals reasonably believed were permanently encased in a fortress of secrecy. The trustee can thus gain major ammunition for claims against insiders, business partners, vendors, attorneys, accountants, advisors, and others. […]

Assessing Legal Risk    “One man’s rubbish is another man’s treasure.” -William & Robert Chambers Journal of Popular Literature, Science and Arts (1879)  “A little learning is a dangerous thing” -Alexander Pope, An Essay on Criticism (1709)    Purchasing operating assets from a financially distressed seller is a fantastic opportunity to buy low. Before doing so, however, any buyer must take into account a host of considerations, including, but not limited to, operational, competitive, integration, and legal issues, such as fraudulent transfers and successor liability. Buying a business, or business […]

The Legal Requirements to Cram Down a Plan on Creditors By filing a Chapter 11 petition, the debtor seizes the initiative in proposing a reorganization plan, which is to provide how soon, in what amount, and in what manner creditors’ claims are paid.[i] But a debtor does not necessarily get its way. A class of creditors who are not getting paid in full may reject the plan, which will prevent confirmation on a consensual basis, but the debtor may, by fulfilling additional requirements, ‘cram down’ the plan on those creditors […]

Another State Eases Access to Banking Services Pending a Federal Solution On July 6, 2023, Missouri Governor Michael L. Parson signed into law Senate Bill 187 (S.B. 187), also known as the Commercial Financing Disclosure Act. This legislation continues the trend at the state level to ease access to capital for cannabis-related businesses. S.B. 187, and legislation like it, come to the benefit of court-appointed cannabis receivers as well, given their efforts to streamline financing within the industry. This all comes as particularly welcome news, given the rise in cannabis […]

A Match Made in Heaven? At first blush, cannabis and a legal practice like receivership might seem an unlikely match. Medical and recreational cannabis has steadily grown in acceptance and legalization over the past decade in the United States. However, there are times when cannabis businesses face insolvency and need a legal solution. As of right now, cannabis companies are not eligible for bankruptcy protection. In many cases, the groups they make payments to are also not eligible. This affects not only the companies but also the employees and their […]

Special committees made up of independent directors can guide a company through the bankruptcy process without accusations of bias.

The Chapter 11 debtor is subject to reporting obligations which provide parties with financial and business information about the debtor.

Secured creditors and buyers of distressed assets don’t have to worry about courts limiting their credit bids, but one Delaware case is cause for concern.

Creditors looking to pursue a collections action should understand how Chapter 7 and Chapter 13 bankruptcy processes can affect efforts to collect.