With the U.S. economy experiencing the worst contraction in years due to widespread shutdowns associated with the COVID-19 pandemic, struggling small businesses need debt relief more than ever. While the Small Business Reorganization Act (SBRA) is still relatively new, it has proven to be a useful tool for small businesses seeking to avoid liquidation, according to a New York Law Journal commentary. Not only have courts been lenient in approving retroactive petitions under subchapter V, but new filings also continue to increase, especially in those states most affected by the pandemic. The streamlined and relaxed plan confirmation requirements of SBRA have already proven useful. For example, Sustainable Restaurant Holdings, the parent company of a west-coast sushi restaurant chain severely impacted by the COVID-19 pandemic, successfully confirmed a plan that provided for a going-concern transaction in just over two months. (In re Sustainable Restaurant Holdings, Inc., Case No. 20-11087 (Bankr. D. Del. July 16, 2020). Despite a lack of impaired creditor support, the plan was confirmed pursuant to new section 1191, as it provided for all cash on hand and the revenues and proceeds of all assets of the debtors to be distributed to creditors over time. As companies seek to recover from the COVID-19 pandemic and chapter 11 bankruptcy filings continue to increase, small business debtors, which may not have been able to afford a typical chapter 11, have seemingly embraced the new, more cost-effective option afforded by the SBRA, according to the commentary. Read more.
*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
SBRA will be one of the many important topics of discussion at the Insolvency 2020 Virtual Summit. Sixteen leading insolvency organizations are participating in the Virtual Summit to bring thought leaders from the worlds of restructuring, insolvency and distressed debt for insightful online programming and engaging networking via a state-of-the-art virtual platform. Click here for more information and to register.
