Chapter 11 Reform Commission Co-Chair Proposes Legislation for Viable Reorganization of Small and Medium-Sized Enterprises
Alexandria, Va. — Robert J. Keach of Bernstein, Shur, Sawyer & Nelson, P. A. (Portland, Maine) and co-chair of ABI's Commission to Study the Reform of Chapter 11 today proposed legislation to provide a viable option for small and medium-sized enterprises (SMEs) looking to reorganize under the Bankruptcy Code. “Most financially troubled SMEs simply avoid chapter 11 altogether,” Keach said in written testimony today before the Senate Judiciary Subcommittee on Oversight, Agency Action, Federal Rights and Federal Courts. The proposed legislation in Keach’s testimony is based on the Commission’s proposed reforms to reinstate reorganization under the Bankruptcy Code as a viable option for SMEs. “The bill is not just a ‘small business’ bankruptcy bill for the tiniest firms; the proposed restructuring option would apply to approximately 90 percent of all business filers by number,” according to Keach’s testimony.
Key provisions of the proposed legislation include:
- Removing unrealistic and artificial deadlines and allowing SMEs to work with the courts and their stakeholders to establish sensible restructuring timelines.
- Reducing the amount, and limiting the kinds, of information that an SME debtor must provide when filing a chapter 11 case.
- Reducing the reporting requirements imposed on SMEs.
- Not requiring the U.S. Trustee to appoint a committee of unsecured creditors in an SME case, unless requested by a creditor or needed for other reasons.
- Allowing an SME debtor or other stakeholder in a case to request the appointment of a professional with skills tailored to the particular problems facing that debtor.
- Encouraging parties, and allowing the court, to reduce or control the costs of a chapter 11 case by streamlining the plan of reorganization process, providing clear rules for the SME debtor’s reorganization, and structuring fees in the case to fit the size and resources of the particular SME debtor.
- Providing a plan of reorganization option (as a default if a deal is not reached) that allows an SME owner to maintain some ownership interest in the company while preserving the rights of secured creditors and that seeks to repay unsecured creditors in full within a specified period.
Click here to read Keach’s full testimony and the proposed legislation.
“Because of the jobs it will save, this is a jobs bill that is already paid for,” according to Keach’s testimony. “The courts are there, the system is there, and it costs no more to make it work effectively to save companies.”
ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 12,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abi.org. For additional conference information, visit http://www.abi.org/calendar-of-events.