The ABI Commission studying reform of Chapter 11 met for its seventeenth and final time at the UT Bankruptcy Conference in Austin, Texas on Friday November 22, 2013. The Commission heard from a total of eight witnesses on a variety of topics. Seven of the eight witnesses touched on the venue issue with a substantial majority favoring reform. Part 1 will discuss the future of Chapter 11 and proposed reforms to address the Stern problem, while Part 2 will discuss venue.
The Future of Chapter 11
Commission Co-Chair Al Togut introduced the topic with a discussion of how the world had changed since the Bankruptcy Code was adopted. He stated that in 1979, companies were likely to be based in the United States, employ American workers and have very little secured debt. Today, companies are likely to be multinational and have manufacturing facilities overseas with assets that are frequently leveraged to the point that unsecured creditors are out of the money. He stated that Commissioner Ken Klee who worked on drafting the Bankruptcy Code estimated that the Code would have a shelf life of no more than 30 years and then would have to be reworked. This set the stage for a discussion on the future of chapter 11.