The second topic our Contributors take on is the practice of appointing “independent directors” for troubled companies, often on the eve of bankruptcy. We received a wide range of responses from our Contributors with many feeling the process is “at least superficially, if not substantively, flawed” (Albanese). That was not a uniform reaction though and the diversity of our Contributors showed the differing views of the market. Many did not want the actions of a few bad apples to overshadow the essential role independent directors can play in “stabilizing” an uncertain situation (Heimowitz) and for calling out “bullsh*t” if necessary (Lederman).…
My experience with independent directors generally has shown them to be hard-working, serious and diligent individuals who seek to enhance the value of debtors’ estates or minimize value degradation that would stem from the pursuit of wasteful litigation. While there are unquestionably instances of legitimate criticism of independent directors, including for having material and not always disclosed current and former ties with case participants, we need to ensure that the cure is not worse than the problem.
Tell us what you think of recent decisions by the District Courts in the SDNY and EDVA reversing plan confirmation based on presence of non-consensual third-party releases? Did these Judges get it right? How do non-consensual third-party releases affect creditor rights (both positively and negatively)? What are the implications of these decisions more broadly for the efficacy and integrity of the Chapter 11 process?