Articles

In the intricate landscape of corporate law, the principle of limited personal liability serves as a crucial foundation. This article explores the nuanced scenarios where this protection can be compromised, particularly in the realm of small-to-midsize and family-owned businesses. By examining potential pitfalls such as trust fund taxes, real estate transactions, credit card usage, unconventional loans, and misleading financial statements, the piece emphasizes the importance of proactive measures for owners, directors, and officers. With insights into the increasing prevalence of claims against officers and directors, the summary underscores the necessity for vigilant oversight and strategic decision-making. Ultimately, it calls for a comprehensive approach, urging stakeholders to prioritize diligence, transparency, and legal compliance to safeguard their assets in the face of financial challenges and insolvency.

This article explores the complexities of exculpation clauses in accounting malpractice, using the recent case BAK Advisors LLC v. Sax LLP as a focal point. The case highlights the importance of specific exculpation language, distinguishing between negligence and gross negligence. The court found broad exculpation clauses contrary to public policy, emphasizing the need for precision. Strategic timing of dismissal motions is crucial, as premature filings can be denied. The lessons from this case underscore the importance of refining exculpation clauses, considering state laws, and strategically approaching legal actions in the evolving landscape of financial restructuring.

The article, crafted by a Ken A Rosen, restructuring professional, addresses the increasing trend of companies holding intellectual property, especially trademark licenses, entering Chapter 11 due to the ongoing pandemic. The focus is on the strategic shifts in trademark license negotiations, with an emphasis on the rights of both distressed trademark licensors and licensee companies. The article explores the risks faced by companies heavily reliant on third-party trademark licenses and provides insights into protecting investments and navigating the complexities of Chapter 11. A key highlight is the emerging trend of companies choosing to renegotiate or sell trademark rights instead of outright rejection. The professional's diverse industry experience enriches the content with relevant case studies and examples. Overall, the article provides a comprehensive understanding of the evolving landscape of trademark license challenges in Chapter 11.

Updated by Ken A Rosen, a seasoned restructuring professional, provides comprehensive insights into successful hotel debt restructuring strategies in the aftermath of the COVID-19 pandemic. Emphasizing the importance of early and confidential communication with lenders, the article outlines key steps: presenting detailed financial plans, precise valuation, and demonstrating willingness to compromise. Additionally, it explores alternative options, including Chapter 11 considerations and state law variations. The overarching theme is the significance of credibility in negotiations, with lenders and judges more likely to cooperate when presented with a well-thought-out plan addressing macroeconomic challenges.

Ken A. Rosen, an experienced restructuring professional, provides a comprehensive article on presenting a Chapter 11 debtor's financial information to the bankruptcy court. In the aftermath of the COVID-19 pandemic, companies face challenges necessitating Chapter 11 for either orderly liquidation or restructuring. The article emphasizes the court's interest in understanding the factors precipitating bankruptcy and underscores the pivotal role of cash flow, advocating for a detailed monthly cash-flow statement. Beyond basic reporting, Rosen recommends a three-column presentation, detailing actual results, adjustments for extraordinary items, and restated financial results. This approach aims to offer a nuanced view of the debtor's core business performance, preventing misinterpretations. The article concludes by stressing the importance of providing a bridge to success, acknowledging the time required for implementing solutions and demonstrating viability. In essence, Rosen's article provides depth and insight into the intricacies of Chapter 11 restructuring, leveraging his expertise in the field.

Kenneth A Rosen addresses the challenges faced by unsecured creditors seeking recovery after Chapter 11 bankruptcy and expedited bulk-asset sales. It focuses on the dynamics of pursuing claims against directors and officers (D&O claims) and outlines protective measures for vulnerable directors. The corporate bankruptcy landscape, characterized by low Chapter 11 success rates and expedited sales, prompts unsecured creditors to explore alternative recovery sources. The evaluation of D&O claims involves scrutinizing factors like the business judgment rule, the board's role in insolvency, and the decision-making process. A properly functioning board, independent from management influence, is emphasized, with red flags including familial ties and lack of diversity. Recognizing signs of financial distress is crucial for directors, who are urged to fulfill fiduciary duties even toward creditors as insolvency approaches. The article advises directors to actively engage in finding solutions rather than resigning, as resignation may not absolve past actions from scrutiny. Ultimately, the article empowers directors and officers to protect themselves in the complex landscape of corporate restructuring by adhering to fiduciary duties and ensuring a well-functioning board.

The ongoing debate over bankruptcy venue reform has been reignited due to the surge in bankruptcy cases post-COVID-19. High-profile cases like Purdue Pharma, Mallinckrodt, Boy Scouts of America, and others filing in "magnet districts" have prompted discussions. The proposed Bankruptcy Venue Reform Act aims to limit filings to locations tied to the debtor's headquarters or assets, but critics argue it oversimplifies complex corporate structures. A proposed compromise suggests specific criteria for venue determination in certain cases. Striking a balance between transparency and the unique nature of bankruptcy cases is crucial as the reform debate continues.

This article guides companies facing financial challenges due to the pandemic on how to effectively request forbearance or loan modifications from lenders. Key points include maintaining up-to-date records, providing realistic financial projections, analyzing the pandemic's impact on operations, adjusting results to showcase pre-pandemic performance, transparently stating assumptions, implementing self-help measures, evaluating collateral, demonstrating principals' commitment, and emphasizing thoughtfulness and honesty in communication. The comprehensive approach aims to strengthen borrowers' cases, fostering constructive negotiations for relief.

When a debtor files for bankruptcy, the automatic stay goes into effect, protecting the debtor's assets from creditors' collection efforts. However, the question arises whether a creditor's mere retention of property already in their possession constitutes a violation of the automatic stay. The Supreme Court, in City of Chicago v. Futton, clarified that passive retention of property does not violate the stay. Nevertheless, creditors should exercise caution and avoid any affirmative actions that could be construed as an attempt to exercise control over the debtor's assets.

The world of DIP (debtor-in-possession) lending offers lucrative opportunities for those willing to venture into the complex realm of bankruptcy proceedings. DIP loans, designed to provide financial lifelines to distressed companies undergoing Chapter 11 reorganization, can yield substantial returns for lenders who carefully assess risks and exercise prudent risk management strategies.