ABI Commission to Study the Reform of Chapter 11
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table of contents
I. Introduction .....................................................................................................................................1 II. Executive Summary of Proposed Principles ...............................................................5 III. Background on the Commission and the Study Project ...................................7
A. Brief History of U.S. Business Reorganization Laws ................................................................8 B. The Need for Reform ....................................................................................................................12 C. The Commission’s Study ................................................................................................................13 D. The Commission’s Deliberations ................................................................................................16
IV. Proposed Recommendations: Commencing the Case ..........................................19
A. Oversight of the Case .................................................................................................................21
1. The Debtor in Possession Model ................................................................................................................21 2. The Chapter 11 Trustee .................................................................................................................................26 3. The Estate Neutral .........................................................................................................................................32 4. Statutory Committees ...................................................................................................................................38 5. Estate Fiduciaries............................................................................................................................................43 6. Valuation Information Packages ...............................................................................................................45 7. Professionals and Compensation Issues ..................................................................................................48 8. Costs in Chapter 11 Cases ............................................................................................................................55
B. Financing the Case ........................................................................................................................67
1. Adequate Protection .....................................................................................................................................67 2. Terms of Postpetition Financing ...............................................................................................................73
C. Breathing Spell for Debtor upon Filing ..................................................................................79
1. Timing of Approval of Certain Postpetition Financing Provisions ..............................................79 2. Timing of Section 363x Sales .......................................................................................................................83
D. Payment of Certain Claims upon Filing ....................................................................................87
1. Prepetition Claims and the Doctrine of Necessity ............................................................................88 2. Wage and Benefits Priorities ......................................................................................................................92
E. Financial Contracts, Derivatives and Safe Harbor Provisions ..........................................94
1. Scope of Section 546(e) Safe Harbors .......................................................................................................95 2. Treatment of Repurchase Agreements Under Safe Harbors ...........................................................99 3. Assumption of Financial Contracts .......................................................................................................102 4. Section 562 and “Commercially Reasonable Determinants of Value” .......................................104 5. Walkaway Clauses ........................................................................................................................................106 6. Exclusion of “Ordinary Supply Contracts” from Safe Harbors...................................................107