Chapter 11 and Independent Directors: Maximizing Recovery; Challenging Conflicts; Defending Director Integrity

This CLE course will explore the use and effect on creditor options and payouts of companies bringing on new "bankruptcy directors" as they hurdle toward Chapter 11, the impact of bankruptcy or "independent" directors on the integrity of the bankruptcy system, and what creditors and creditors' committees can do if they claim directors are hijacking the process for the benefit of equity holders. Independent directors will need to best position themselves to refute such accusations and efforts.

A significant source of assets to pay unsecured creditors in Chapter 11 could be the recovery from shareholders or other insiders for alleged self-dealing or violation of fiduciary duties. Creditors, shareholders, and secured lenders may disagree over the value and merits of this litigation, which frequently alleges insider self-dealing that contributed to the bankruptcy filing.

According to unsecured creditor constituencies, to thwart recovery efforts and suppress creditor voices, shareholders have begun adding independent bankruptcy directors before or shortly after filing Chapter 11 and then ceding to their control actions against shareholders. Proponents argue independent directors bring the efficiency and speed necessary to preserve the business.

Creditors need to know what tools are available to them to resist the actions of bankruptcy directors to protect those that violate duties to the debtor. Independent directors need to know how to properly position themselves to defend against such accusations.

Listen as this panel of experienced bankruptcy counsel discusses the phenomenon of bankruptcy directors and what strategies are available to creditors to increase their recovery.