Law Commons^™

Bankruptcy Voting And The Designation Power, Christopher W. Frost

Law Faculty Scholarly Articles

Chapter 11 of the Bankruptcy Code is the only form of bankruptcy that requires winning the consent of the creditor body. Creditors are given the right to vote based on an underlying assumption that they will cast their votes to maximize recovery on their claims. When creditors collectively vote to further these distributional goals, then the estate in turn should realize the maximum value for its assets. "Value maximization" is one of the fundamental goals of chapter 11, and voting in bankruptcy is an important way of achieving that goal.

The problem with these assumptions is that creditors sometimes vote …

The Theory, Reality, And Pragmatism Of Corporate Governance In Bankruptcy Reorganizations, Christopher W. Frost

Law Faculty Scholarly Articles

Governing a corporation during a Chapter 11 reorganization presents a special case of the age-old problem of the separation of ownership and control. Critics of Chapter 11 have long pointed to the insulation provided by the automatic stay to managers of the business as one of the causes of bankruptcy inefficiency. Protected from the normal contractual and market forces that restrain the behavior of managers of healthy companies, managers of firms in bankruptcy, the harshest critics charge, use delay and other strategies to enrich themselves and the shareholders at the expense of the firm's creditors.

This Article addresses the financial …

Bankruptcy Redistributive Policies And The Limits Of The Judicial Process, Christopher W. Frost

Law Faculty Scholarly Articles

Business failure negatively affects a broad range of interests, yet the bankruptcy process directly protects only a small segment of interest-holders: the creditors. Some commentators argue for expansion of that protection to encompass redistributive norms and provide for the interests of non-investors in the failed business. The Bankruptcy Reform Act of 1994’s establishment of a national commission to study the bankruptcy process and its broader policy implications brings with it the opportunity to consider that redistributive argument and perhaps change the process to include the interests of non-investors under the reorganization umbrella. This Article responds to those who would have …

Organizational Form, Misappropriation Risk, And The Substantive Consolidation Of Corporate Groups, Christopher W. Frost

Law Faculty Scholarly Articles

The financial collapse of a corporation raises significant questions regarding its shareholders and creditors' ex ante allocation of the risk that such a collapse might occur. In bankruptcy, most of these risk allocation issues relate to the priority of particular creditors' claims against the assets of the failed business. But determining priority first requires some reasoned means of identifying the assets against which creditors may assert their claims. In many cases, this question is simply one of locating and distributing assets. However, when bankrupt firms have conducted their operations through a complex web of subsidiary corporations, each holding distinct assets …