Chapter V General Case Administration

• Jurisdiction: United States

Chapter V General Case Administration

By Leah M. Eisenberg Arent Fox LLP

A. Exploring and Determining the Goals for the Case

One of the primary functions of a committee is to supervise and investigate the financial and operational affairs of a debtor. A committee also serves as a significant party in interest in the negotiation and formulation of a debtor's "exit" plan out of bankruptcy. Further, the Bankruptcy Code provides that a committee has a duty to keep unsecured creditors informed. Thus, in order for a committee to properly carry out these very important roles, it must first understand the debtor, the issues faced by the debtor, and the financial and operational goals of the particular case. Once these goals are ascertained, the committee is then in a position to work with the debtor to prepare a case road map and tailor its action plans in the case to meet such goals.

First, the committee and its professionals should work with the debtor to determine whether the case is going to incorporate a sale as a going concern, reorganization, liquidation, or some combination.

Second, the committee and its professionals should work with the debtor and its advisors in analyzing the debtor's operations to understand whether further or new operational changes must take place in order for the debtor to achieve its financial and operational goals. The committee and its advisors should also assess the operational viability of the debtor through a review of historic, current and projected information, as well as monthly operating reports and other financial information. The committee and its professionals can and should independently review and confirm the business judgment of the debtor in conducting its business and operations. This undertaking involves a determination by the committee of the viability of the debtor's management and business plans.

Third, after the committee conducts its own due diligence and investigation, the committee should determine whether there are grounds for the appointment of an examiner to investigate certain activities or transactions, or whether there are grounds for the appointment of a chapter 11 trustee to displace the debtor and take over operations when, for example, the goals of the debtor and the committee are not necessarily aligned.

Finally, the committee and its professionals should work with the debtor to determine the proper "exit" from bankruptcy, and whether a plan of reorganization, plan of liquidation, structured...