The interrelationship between an assignment for benefit of creditors (“ABC”) proceeding and an involuntary bankruptcy filing, for the same debtor, is governed by various portions of the Bankruptcy Code.
But that relationship remains ill-defined, nonetheless.
What follows is an attempt to summarize a bankruptcy court opinion dealing with that relationship. And here is two of its main conclusions:
在经济下行的时候，原来一些质地不错的企业也会陷入困境。对于困境企业而言，通过破产重整焕发生机，也许是最后一根救命稻草；对于投资人而言，未来真正的赚钱机会，也将出现在更多、更复杂的破产重整项目中。今天，我想跟大家谈谈破产重整投资的趋势、挑战与未来。
一、重整投资的趋势
首先，我们来谈谈重整投资已经展现出的四个变化趋势。
第一个趋势，是从被动投资到主动投资。
什么是被动投资？以往一些破产项目中的重整投资人，往往本身就是破产企业的债权人，他们随着陷入危机的破产企业一起被困在了“水中”，不得不通过参与重整投资寻求最后的“上岸”机会，比较典型的就是一些作为困境企业债权人的AMC公司。
什么是主动投资？这几年里，逐渐有一些“岸上的人”也瞄准了重整投资领域。“岸上的人”，是与困境企业没有关系的外部投资人，他们没有受到困境企业的牵连，而是将重整投资视作一个宝贵的商业机会，主动参与其中。这样的“岸上投资人”，既包括产业投资人，也包括财务投资人。
On June 21, 2022, Congress and the President (i) extend the $7.5 million debt limit for Subchapter V eligibility, and (ii) adjust other Subchapter V rules.[Fn. 1]
One of the adjustments is this:
“Without these [mediated] settlements, there is no Plan.”
- From Opinion on Plan confirmation, In re Boy Scouts of America, Case No. 20-10343, Delaware Bankruptcy Court, Doc. 10136, at 80 (issued July 29, 2022).
The Boy Scouts of America bankruptcy has achieved a milestone: on July 29, 2022, the Bankruptcy Court issues a 281-page Opinion on confirmation of Debtor’s Plan of Reorganization. The Opinion is generally favorable toward Plan confirmation but identifies a number of issues remaining to be resolved.
“[T]he bankruptcy court— . . . (2) shall excuse compliance . . . if . . . an assignee for the benefit of the debtor’s creditors . . . was appointed or took possession more than 120 days before the date of the filing of the petition, unless . . . necessary to prevent fraud or injustice.”
11 U.S.C. § 543(d)(2) (emphasis added).[Fn. 1]
On August 15, 2022, the Tenth Circuit Court of Appeals reinstates its prior In re Hammons opinion, which deals with remedies for unconstitutionally lower quarterly fees charged to bankruptcy debtors in Alabama and North Carolina.[Fn. 1]
Opinion Points
Check out these points from the Hammons opinion:
Congress must be allowed“to fashion a modern bankruptcy system which places the basic rudiments of the bankruptcy process in the hands of an expert equitable tribunal.”
—from Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 94 (1989) (Blackmun dissent, emphasis added).
Justice Blackmun had a point—back in 1989—that remains true today:
When parties contract for arbitration of their disputes:
Assignment for benefit of creditors (“ABC”) laws are, historically, a debtor remedy. ABC laws are a voluntary debtor tool for shutting down and winding up the debtor’s failed business.
Ancient History
ABC laws began under the common law, back in merrie olde England, arising out of the law of trusts. Under trust law, any person can, without restriction, transfer assets into a trust for the benefit of one or more people.
An assignment for benefit of creditor (“ABC”) is, historically, a nonjudicial process for administering the affairs of a failed business. ABC laws are rooted in English common law and predate enactment of federal bankruptcy laws in the U.S.[Fn. 1]
An ABC is made by a formal, voluntary transfer of most-or-all of a business’s assets to an assignee, in trust, to apply the property or its proceeds to the payment of debts and to return any surplus to the debtor.