58
Suffice it to say that the
11.13 It would not be appropriate to try to give a summary of the
Chapter 11 proceedings, or to compare them with the Administration Order
provisions, in this Report at this stage.
Standing Committee can see why a number of local practitioners find
the American system attractive. It is designed to provide a company
in serious financial trouble with a last alternative to liquidation.
If the company files under Chapter 11 and can get the majority in
number and value of its creditors to agree to its plans for dealing
with its difficulties, no creditor can take any action against the
company to enforce his rights. It is not, as some laymen think,
an "easy option" because the stigma attached to the Chapter 11 proceedings
will affect the company's future credit-worthiness and the valuation of
its shares. There is no guarantee that the creditors will accept the
company's proposals and they may insist on getting rid of the
incumbent management as the price for acceptance.
11.14 For some practitioners, the greatest merit of the Chapter 11
procedure is that it stops a single small or minor creditor who refuses
to agree to the plans of the majority creditors for rescuing a
company in trouble, from going ahead and putting the company into
liquidation. Apparently such a creditor is popularly known as a
"rogue creditor".
11.15 The obvious weakness in the protection afforded to a company
by the Chapter 11 procedure, and indeed any other similar procedure,
is where the company has assets situated in other jurisdictions, the
most obvious examples being a shipping company and an airline company.
No matter what American law may do to restrict the rights of creditors
in America, there is nothing to prevent, say, a Spanish creditor
enforcing his rights against a ship or aircraft which docks or lands
159
No comments yet.
Private notes are available after approval.