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The last major revision to U.S. business reorganization laws occurred in 1978. In the nearly four decades since then, the markets and financial products, as well as the industry itself, have evolved. Accordingly, ABI established the Commission to Study the Reform of Chapter 11 to evaluate the U.S.

Most bankruptcy attorneys are born negotiators. It is part of our DNA to zealously advocate for our client’s position and simultaneously explore options for consensual resolution. Unfortunately, many bankruptcy disputes cannot be resolved this way. Perhaps the client has unrealistic expectations, or perhaps there is a personality conflict between the lawyers and their clients. Or possibly the lawyer, the client or both view settlement dialog as a sign of weakness. Or the dispute is so complex that the parties are unable to figure out how to even begin discussing a compromise.

Following a nearly-three-year study, on Dec. 8, 2014, the ABI Commission to Study the Reform of Chapter 11 published a 400-page report containing recommendation and principles for policymakers. This article focuses on chapter 11 reform relating to professional retention and compensation.

The U.S. Court of Appeals for the Second Circuit issued an opinion on Jan. 21, 2015,[1] holding that a UCC-3 termination statement was effective to extinguish a security interest of up to as much as $1.5 billion, notwithstanding that the secured lender erroneously authorized the filing of the termination statement and did not intend to extinguish the security interest.

Privacy issues are not new to corporate reorganizations; §§ 322 and 363(b)(1) were enacted as part of BAPCPA precisely to address such concerns.[1]  In an increasingly digital age, reorganizing debtors may possess a slew of personally identifiable information (PII), itself a term defined at § 101(41A).[2]  These issues have come to the forefront in connection with the recent ConnectEDU bankruptcy and asset sale.[3]

One of the fundamental rights afforded to a debtor is the right to reject burdensome contracts and unexpired leases. However, where the debtor is the lessor of real property or the assignor of intellectual property, rejection of the underlying agreement could be catastrophic to the nondebtor counterparty. Recognizing the potential prejudice to contract counterparties, Congress incorporated provisions into the Bankruptcy Code (§§ 365(f) and 365(n)) that permit these affected nondebtor parties to continue to use the leased properties for the life of the term, if they so choose.

Every dollar counts, and for debtors that are party to tax-sharing agreements (“TSAs”), significant dollars may be at stake. As the Sixth and Ninth Circuit Courts of Appeals have demonstrated, when dealing with tax refunds and TSAs, it is not always clear that a debtor’s estate is entitled to every dollar.

This two-part article discusses how the United Kingdom and the United States have become the two main jurisdictions where debtors outside of such jurisdictions (foreign debtors) have been able to successfully restructure their businesses. Because of the flexibility of both legal systems and their focus on reorganization as opposed to liquidation, which often would be the outcome of the debtors’ domestic insolvency process, foreign debtors have used the U.K. or U.S. legal systems to restructure successfully.

[1]In some bankruptcy courts, the use of combined hearings on chapter 11 disclosure statements and plans in non-prepackaged, non-small business cases is expressly contemplated by local rule and relatively common.[2] Delaware, which is so often on the cutting edge of chapter 11 practice, has not spoken one way or the other on the use of combined hearings in non-prepackaged, non-small business cases in its local rules or standing orders.