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).…
In my experience, independent directors contribute essential governance and restructuring proficiency to companies contemplating in-court restructuring or out-of-court liability management. They often are the only non-paralyzed directors able to drive board meetings and corporate actions, reassure management, hold off sponsors and creditors, evaluate advice, and control advisors. In addition to stabilizing the company and steering the internal restructuring process, a skilled independent director promptly will seek to improve likely-deteriorated communication with creditors or minority interest holders.
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?