Posts Tagged

Jim Millar

Independent Directors

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).…

Jim Millar Speaks On Independent Directors

The fundamental issue here revolves around a breakdown in trust—that is, trust in the process. Some stakeholders in the restructuring process have reached the point where they simply don’t accept that independent directors are doing their job fairly and diligently. While people can debate whether in a given case the independent director did—or didn’t—properly discharge their duty, a critical mass (including professionals and judges) have expressed concern.

Third-Party Releases

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?

James Millar Speaks On Third-Party Releases

The recent decisions are ultimately likely to be helpful to creditors because, going forward, the review of third-party releases will need to be much more rigorous.  The bottom line is that third-party releases fall into a bucket of chapter 11 provisions that bankruptcy courts typically review, broadly speaking, under fairly vague standards, such as “did the recipients of the release provide ‘substantial value’?” or “are the releases ‘necessary for the success of the reorganization?’”  Creditors pursuing confirmation objections based on those standards have an exceedingly difficult job, and they regularly get overruled.  These decisions put the brakes on, to some extent, the free-flow of third party releases, which should result in chapter 11 plans that are ultimately fairer to all creditors.