Avoiding business bankruptcy is one of the Business Bankruptcy Group’s primary goals.
Sometimes a bankruptcy is the worst solution. Bankruptcies for companies should only be filed after they are carefully considered by an expert in Chapter 11. Filing a Chapter 11 petition is easy. Confirming a plan of reorganization is complex and time consuming. A company should have a reasonable expectation that they can come out of a Chapter 11 through a confirmed plan before they use the process. Otherwise, the company will likely end up in a Chapter 7 liquidation.
The biggest hurdles business owners face is that they need to be prepared to make material changes to their company, and work with their creditors to jointly solve the problems. Chapter 11 is about sharing information, being open to change, and building a consensus with the creditors. In addition, the principals of companies often have personal guarantees to lenders and other creditors. Thus, while they are attempting to save their business through a Chapter 11, they are also having to personally defend themselves against these guarantees.
The principals of a company in a Chapter 11 have fiduciary duties to the creditors, equity holders and the court. Thus, they need to be transparent, honest and need to place the welfare of the company ahead of their own self-interests. To the extent that management is unable or unwilling to act as a fiduciary, the court can appoint a Chapter 11 trustee. Thus, it is imperative that the company leaders keep the creditors, employees and customers informed about the process.
A large percentage of the firm’s bankruptcy work is in non-bankruptcy workouts. In other words, there is no bankruptcy filed. The firm’s bankruptcy attorneys always try and workout matters consensually with creditors because bankruptcy should be a last resort. Accordingly, it is essential that troubled companies obtain insolvency advice early so that there is time to try and consensually resolve matters. If the company waits too long to obtain insolvency counsel, it may be too late.
Other Business Counseling
The Bankruptcy Practice Group interacts with many other practice groups within Culhane Meadows to provide a full and complete package of advice to clients. Frequently, the Bankruptcy Practice Group is called upon by members of the corporate and lending groups to provide advice on such issues as avoiding fraudulent conveyance or preference liability in connection with pending transactions, perfecting security interests so as to be effective against a bankruptcy trustee, or advising with respect to asset transfers. They have worked with the Firm’s tax counsel to provide sound bankruptcy advice and insure that the tax consequences are acceptable as well. Bankruptcy attorneys are often included in the negotiations of real estate transactions to enable clients to anticipate the consequences of financial problems with developers, owners, tenants, or borrowers and provide solutions or options in the documents.