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[Abstract]The thesis introduces the corporate rescue in the USA chapter 11.
[Key word]chapter 11; corporate rescue procedures
In the USA where is the motherland of corporate rescue, the purpose for establishing such code is in order to protect US companies during the financial crisis, especially the oil crisis happened in 1970’s. Its first foundation code later influenced many western countries, such as UK, France, Germany, and ect. There is no system of privately appointed receivership in America, the US style is the debtor petition to the court and then followed by the automatic moratorium on the fulfillment of security. Comparing with the UK, the USA insolvency procedure dose rather prefer debtor than the creditor. Though it is demanded that secured creditors should be provided with sufficient protections, debtors may still take advantage of their superior position and override the creditors to some extent, such as the “cram down” phenomenon.
In the USA, the voluntary procedure can be activated directly by the debtors file the voluntary petition to the courts. Then the process of reorganization takes place along with the automatic stay, namely moratorium in order to maximum the rest company’s asserts as a going concern. The provision of automatic stay plays a significant role in the whole procedure, inter alias, it facilities to provide the two primary objectives of the chapter 11, it prevents creditors from picking apart the debtor’s assets at a time may cause the company business cut into pieces. Meanwhile, it also assures the second aim that is restraining any opportunities may lead one creditor from seizing assets before others. Therefore, the automatic stay protects both sides a “breathing space”, similarly, as new the UK I.A. 2000, moratorium. Normally, the existing management will not be changed, so the company still in debtor’s hands, it calls “debtor-in-possession”(DIP).
The stay has a very wide scope: Section 362(a) of Bankruptcy Code lists actions that are stayed. IT seems that the stay prohibits actions that the secured creditors tend to concern most. The obvious example is that secured creditors’ claims on the enforcement of their pre-petition security interests are halt, namely they could neither demand to carry on any judicial proceedings against the debtors and their property, nor to carry out self-help remedies such as taking the possessions of the property.
On the contrary, there are some situations in which the automatic stay does not apply. For instance, if the suits are completely on post-petition conduct; or when the debtor and creditor’s obligations to each other both arise from the same transaction, which is similar to setoff, the creditor may have a right of recoupment and the court declares that recoupment is not subject to automatic stay. In addition, there still exits some other exceptions, and they mainly have some relations with the enforcement fo government policy or regulatory powers.
As chapter 11 reorganization procedures states, generally DIP continues to control company’s management and business, and thus it is allowed to dispose of the assets in the ordinary way. This disposal process is initiated by handing in a report to the court for permission. When the court is satisfied with the report, DIP is also allowed to deal with it as if it is not so charged, and the chargee’s interests are transferred to the proceeds.
Within 120 days the DIP shall draw a reorganization plan concerning how to release the debt, secured creditors and other interested parties have no rights to propose and alternative plan. When the DIP failed to draw such plan or the plan has not been accepted within 180 days since first day of voluntary arrangement, any creditor if they feels their rights and interests are in danger, they may allow to hand in a substantial report afterwards.
During the realization plan period, the creditors may be separated themselves by the similar interests into groups, though all creditors shall be treated equally. The plan is required to be approved by creditor’s votes where more than 2/3 in total that can put the approval in the performance. Under paragraph 1129, it specifies that the restructuring plan dose not need overall consent of the creditors voting, the court may assist petitioner so as to reach an agreement before the final confirmation.
Reference
[1]Kevin A. Kordanan K A., and Eric P A.,A positive theory of Chapter 11[M].New York University Law Review,1999, 74:161-234.
[Key word]chapter 11; corporate rescue procedures
In the USA where is the motherland of corporate rescue, the purpose for establishing such code is in order to protect US companies during the financial crisis, especially the oil crisis happened in 1970’s. Its first foundation code later influenced many western countries, such as UK, France, Germany, and ect. There is no system of privately appointed receivership in America, the US style is the debtor petition to the court and then followed by the automatic moratorium on the fulfillment of security. Comparing with the UK, the USA insolvency procedure dose rather prefer debtor than the creditor. Though it is demanded that secured creditors should be provided with sufficient protections, debtors may still take advantage of their superior position and override the creditors to some extent, such as the “cram down” phenomenon.
In the USA, the voluntary procedure can be activated directly by the debtors file the voluntary petition to the courts. Then the process of reorganization takes place along with the automatic stay, namely moratorium in order to maximum the rest company’s asserts as a going concern. The provision of automatic stay plays a significant role in the whole procedure, inter alias, it facilities to provide the two primary objectives of the chapter 11, it prevents creditors from picking apart the debtor’s assets at a time may cause the company business cut into pieces. Meanwhile, it also assures the second aim that is restraining any opportunities may lead one creditor from seizing assets before others. Therefore, the automatic stay protects both sides a “breathing space”, similarly, as new the UK I.A. 2000, moratorium. Normally, the existing management will not be changed, so the company still in debtor’s hands, it calls “debtor-in-possession”(DIP).
The stay has a very wide scope: Section 362(a) of Bankruptcy Code lists actions that are stayed. IT seems that the stay prohibits actions that the secured creditors tend to concern most. The obvious example is that secured creditors’ claims on the enforcement of their pre-petition security interests are halt, namely they could neither demand to carry on any judicial proceedings against the debtors and their property, nor to carry out self-help remedies such as taking the possessions of the property.
On the contrary, there are some situations in which the automatic stay does not apply. For instance, if the suits are completely on post-petition conduct; or when the debtor and creditor’s obligations to each other both arise from the same transaction, which is similar to setoff, the creditor may have a right of recoupment and the court declares that recoupment is not subject to automatic stay. In addition, there still exits some other exceptions, and they mainly have some relations with the enforcement fo government policy or regulatory powers.
As chapter 11 reorganization procedures states, generally DIP continues to control company’s management and business, and thus it is allowed to dispose of the assets in the ordinary way. This disposal process is initiated by handing in a report to the court for permission. When the court is satisfied with the report, DIP is also allowed to deal with it as if it is not so charged, and the chargee’s interests are transferred to the proceeds.
Within 120 days the DIP shall draw a reorganization plan concerning how to release the debt, secured creditors and other interested parties have no rights to propose and alternative plan. When the DIP failed to draw such plan or the plan has not been accepted within 180 days since first day of voluntary arrangement, any creditor if they feels their rights and interests are in danger, they may allow to hand in a substantial report afterwards.
During the realization plan period, the creditors may be separated themselves by the similar interests into groups, though all creditors shall be treated equally. The plan is required to be approved by creditor’s votes where more than 2/3 in total that can put the approval in the performance. Under paragraph 1129, it specifies that the restructuring plan dose not need overall consent of the creditors voting, the court may assist petitioner so as to reach an agreement before the final confirmation.
Reference
[1]Kevin A. Kordanan K A., and Eric P A.,A positive theory of Chapter 11[M].New York University Law Review,1999, 74:161-234.