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Full-Text Articles in Law
A Capital Market, Corporate Law Approach To Creditor Conduct, Mark J. Roe, Frederico Cenzi Venezze
A Capital Market, Corporate Law Approach To Creditor Conduct, Mark J. Roe, Frederico Cenzi Venezze
Michigan Law Review
The problem of creditor conduct in a distressed firm—-for which policymakers ought to have the distressed firm’s economically sensible repositioning as a central goal—-has vexed courts for decades. Because courts have not come to coherent, stable doctrine to regulate creditor behavior and because they do not focus on building doctrinal structures that would facilitate the sensible repositioning of the distressed firm, social costs arise and those costs may be substantial. One can easily see why developing a good rule here has been hard to achieve: A rule that facilitates creditor intervention in the debtor’s operations beyond the creditor’s ordinary collection …
Assessing The Chrysler Bankruptcy, Mark J. Roe, David Skeel
Assessing The Chrysler Bankruptcy, Mark J. Roe, David Skeel
Michigan Law Review
Chrysler entered and exited bankruptcy in forty-two days, making it one of the fastest major industrial bankruptcies in memory. It entered as a company widely thought to be ripe for liquidation if left on its own, obtained massive funding from the United States Treasury, and exited via a pseudo-sale of its main assets to a new government-funded entity. The unevenness of the compensation to prior creditors raised concerns in capital markets, which we evaluate here. We conclude that the Chrysler bankruptcy cannot be understood as complying with good bankruptcy practice, that it resurrected discredited practices long thought interred in the …
Bankruptcy Vérité, Lynn M. Lopucki, Joseph W. Doherty
Bankruptcy Vérité, Lynn M. Lopucki, Joseph W. Doherty
Michigan Law Review
In the empirical study we report in Bankruptcy Fire Sales, we compared the recoveries from the going-concern bankruptcy sales of twenty-five large, public companies with the recoveries from the bankruptcy reorganizations of thirty large, public companies. We found that, controlling for the asset size of the company and its presale or pre-reorganization earnings ("EBITDA"), reorganization recoveries were more than double sale recovenes. We are honored that Professor James J. White has chosen to comment on our study. White is an eloquent defender of the status quo, pulls no punches, and always has something interesting to say. Bankruptcy Noir is …
Bankruptcy Fire Sales, Lynn M. Lopucki, Joseph W. Doherty
Bankruptcy Fire Sales, Lynn M. Lopucki, Joseph W. Doherty
Michigan Law Review
For more than two decades, scholars working from an economic perspective have criticized the bankruptcy reorganization process and sought to replace it with market mechanisms. In 2002, Professors Douglas G. Baird and Robert K. Rasmussen asserted in The End of Bankruptcy that improvements in the market for large public companies had rendered reorganization obsolete. Going concern value could be captured through sale. This Article reports the results of an empirical study comparing the recoveries in bankruptcy sales of large public companies in the period 2000 through 2004 with the recoveries in bankruptcy reorganizations during the same period. Controlling for company …
Abandoning Bankruptcy Law's "Identity Of Interest" Exception, Michigan Law Review
Abandoning Bankruptcy Law's "Identity Of Interest" Exception, Michigan Law Review
Michigan Law Review
Section I of this Note discusses the goals and weaknesses of the identity of interest exception; Section II explains the advantages of consolidation and novation; and the final Section suggests a way to separate cases where novation is appropriate from those where consolidation is the preferred remedy.
Corporations-Insolvency-Corporate Officers As Preferred Wage Claimants, E. C.V. Greenwood
Corporations-Insolvency-Corporate Officers As Preferred Wage Claimants, E. C.V. Greenwood
Michigan Law Review
A closed corporation, soon after its formation, executed an assignment for the benefit of creditors. One of the large creditors objected to a preferred wage claim allowed by the assignee to a vice-president and director of the assignor, the officer who had in fact been instrumental in executing the assignment. The claim was for wages amounting to two hundred fifty dollars for alleged manual work for the assignor prior to the assignment and was granted by the assignee on the theory that preferential treatment was authorized by the New York debtor and creditor statutes. The applicable statute reads as follows: …
Taxation-Income Tax-Deduction For Worthless Stock-Objective V. Subjective Test, Rosemary Scott
Taxation-Income Tax-Deduction For Worthless Stock-Objective V. Subjective Test, Rosemary Scott
Michigan Law Review
The taxpayer held stock in a corporation - which had been in receivership for five years, and which had, during all of that time, liabilities substantially exceeding its assets. When the receivership was ended and when a derivative suit against the management was compromised, the taxpayer declared the stock to be worthless and claimed a deduction for 1937. The commissioner denied the deduction on the ground that the stock had not become worthless in 1937. The Tax Court sustained this ruling and the circuit court of appeals affirmed. Held, the value of the stock should be determined by an …
Corporations - Limitation Of Actions - Nature Of Directors' Statutory Liability For Illegal Loans To Stockholders, Oscar Freedenberg
Corporations - Limitation Of Actions - Nature Of Directors' Statutory Liability For Illegal Loans To Stockholders, Oscar Freedenberg
Michigan Law Review
The creditors of a bankrupt corporation sued its directors under a New Jersey statute that made the directors liable for all corporate debts to the extent of loans illegally made to stockholders. The decision hinged on the nature of the directors' liability with respect to the New Jersey statute of limitations. The directors maintained that the action was either for a contractual debt or else for a penalty, and that in either case it was barred by limitations. Held, that the liability of the directors was neither for a simple debt nor for a penalty within the meaning of …
Corporations-Right Of Officers To Purchase Claims Against The Corporation And Enforce Them At Their Face Value
Michigan Law Review
Defendant was enlisted by one of the insolvent corporation's creditors, a holder of preferred stocks and debentures, to buy up landlord's claims against the corporation. These claims were large in number and amounts and were crucial elements in a successful reorganization. By means of the stock vote of the creditor, defendant was elected director of the corporation and remained as such for one month, though during this time he was not active in acquiring landlord's claims. Upon resignation as director, defendant was successful in buying up most of the landlord's claims, it being a fair inference from the facts that …
Corporations-Liability For Unpaid Subscriptions-Power Of Receiver To Collect Unpaid Amount
Corporations-Liability For Unpaid Subscriptions-Power Of Receiver To Collect Unpaid Amount
Michigan Law Review
The liability of a subscriber to corporate stock exists by virtue of the contractual obligation to the corporation to pay the subscription price or the unpaid installment thereon. Because this liability is often declared by statute, it is essential, to avoid a confused analysis of the precise nature of the liability in question, to distinguish other types of stockholder's liability. Statutory super-added liability in excess of the par value of the stock, and liability for watered stock are excluded from consideration. An analysis of the subscriber's liability will be materially aided by a classification with respect to plaintiffs entitled to …
Corporations - Pledge Of Stock - Statutory Liability Of Pledgee
Corporations - Pledge Of Stock - Statutory Liability Of Pledgee
Michigan Law Review
The owner of shares of bank stock pledged them to defendant corporation to secure a loan. Defendant had the bank issue a new certificate to it in its own name. On the failure of the bank plaintiffs, creditors, sought to hold defendant for "double" liability under statute. Held, under the Montana statute providing that pledgees should not be personally liable as stockholders, defendant was not liable despite the fact that the bank's records did not show it to be a pledgee. Mitchell v. Banking Corp. of Montana, (Mont. 1933) 24 Pac. (2d) 124.
Receivers - Consent Receivership Not Allowed In Michigan
Receivers - Consent Receivership Not Allowed In Michigan
Michigan Law Review
A general creditor filed a bill alleging that the defendant corporation's assets as shown by its books have a value in excess of its indebtedness but that it cannot meet its current obligations although its assets, when converted into money would be sufficient to meet them and continue its business; that several suits have been instituted by defendant's creditors and that if executions are issued and levies made, defendant will be compelled to cease operations and losses will be suffered by all of defendant's creditors, whereas, if a receiver is appointed to operate its business their claims may be paid …
Bankruptcy -- Fraudulent Conveyances -- Dealings Between One-Man Corporations Owned By One Person
Bankruptcy -- Fraudulent Conveyances -- Dealings Between One-Man Corporations Owned By One Person
Michigan Law Review
H was president of corporations A, B, and C. Through his control of B and C he secured personal advances approximating $600,000. This money he loaned as personal funds to A which through its directors and officers, in their official capacities, was aware of the source of the funds though not of the exact amounts nor of the fact of unlawful diversion. F bank held certain matured promissory notes of B upon which H had become obligated as guarantor. B and H were in financial difficulties and F bank threatened to throw H into bankruptcy.A thereupon, and …
Review: A Textbook On Law And Business, J. Wayne Ley
Review: A Textbook On Law And Business, J. Wayne Ley
Michigan Law Review
A Book Review on A TEXTBOOK ON LAW AND BUSINESS By William H. Spencer