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).…
On balance, I support the appointment, by financially distressed companies, of independent directors with restructuring experience. This is especially true in more traditional restructuring matters, where directors with such experience can be invaluable to both the company and other board members, in navigating what can be a quick, dynamic and fluid process that is often unfamiliar terrain to the existing board and management. Independent directors can be particularly helpful in making decisions with an eye firmly on preserving and maximizing overall value, a concept that is often not as intuitive to other directors who, for healthy companies, may be more focused on growth, stock price, or other considerations.
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?