BAPCPA to Change Committee Make-up and Practice
Originally from the August 2005 issue of the ABI Journal
by Dennis J. Connolly, Alston & Bird LLP; Atlanta
The means by which creditors’ committees are composed and the process by which changes are made to the membership of committees have been altered by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). The bankruptcy court will have a more significant role in determining the composition of creditors’ committees.
Moreover, creditors’ committees will be required to disclose information to the constituencies that those committees represent and will be required to solicit and receive comments from creditors in the class represented by the committees. These latter changes will likely alter the current practice regarding delivery of material nonpublic information into the possession of the committee. It is likely that the courts will be required to address the competing policy interests in terms of the disclosure of the information to those creditors who are not on the creditors’ committee. The amendments create a high level of complexity and additional costs for committees, and hence, chapter 11 debtors as well.
To Serve or Not to Serve? That Is the Question!
by Dorman Wood, Dorman Wood Associates Inc., Monument, Colo.
Under the current Bankruptcy Code, a credit executive’s decision of whether or not to serve on an official unsecured creditors’ committee has usually been based on the dollar value of their employer’s claim against the bankrupt customer. Did the dollar value of their claim justify the time and expense of serving on the committee? As a credit executive who has served on more than a dozen such committees, chairing half of them, I can state that little, if any concern has been given to the importance and ability of maintaining the confidentiality of the activities of an unsecured creditors’ committee. In many situations, confidentiality agreements are entered into between the debtor and committee members. In any case, committee members have been fairly certain that they operated under an umbrella of confidentiality provided by §1102 of the current Bankruptcy Code.
Agenda for the 2005 Winter Leadership Conference
With the massive revisions to the Bankruptcy Code, there will be plenty for trade creditors and their counsel to talk about at the Winter Leadership Conference at the Hyatt Grand Champions Resort in Indian Wells, Calif., December 1–3, 2005. This is particularly so since the revisions will have been in effect less than two months when the meeting takes place. We look forward to the participation of existing and new members at the committee’s meeting on December 3 at 11:15 a.m.
The Unsecured Trade Creditors Committee will hold a forum on the changes to the Bankruptcy Code that will seriously impact the rights of unsecured creditors in Chapter 11 cases filed after October 17. The discussion will focus specifically on:
- Committees—problems inherent in the new disclosure and solicitation of comments requirements, who is eligible to sit on a committee after reclaiming creditors become administrative claim holders?
- Preferences—ordinary course, timing of payment, venue, small preferences.
- Reclamation and the New Administrative Expense Claim For Suppliers of Goods—carveouts, constitutional issues, what happened to suppliers of services, have they been denied due process?
- The New Small Business Chapter 11—Fast Track and Increased Reporting Requirements.
- New Limits on KERPS—Will They Work?