USA Law and Practice Contributed by: Davis Lee Wright, Natalie D. Ramsey, Katherine M. Fix and Rachel Jaffe Mauceri, Robinson & Cole LLP
Plan Confirmation After receiving the solicited votes, a Chapter 11 plan may be confirmed consensually if all impaired classes vote to accept the plan. A class of creditors accepts a plan if holders of claims totalling at least two thirds in dollar amount and more than one half in number of those voting vote to accept the plan (11 USC Section 1126). A Chapter 11 plan may be confirmed by “cramming down” the plan on a non-consenting creditor class if (i) at least one impaired non-insider creditor class votes to accept the plan by the requisite majorities, and (ii) the plan satisfies all other Bankruptcy Code requirements, including in 11 USC Sections 1123 and 1129 (a). Having concluded that these requirements have been met, a court may confirm the plan so long as it “does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or inter - ests that is impaired under, and has not accepted, the plan” (11 USC Section 1129 (b)). See 4.6 The Posi- tion of Shareholders and Creditors in Restructuring, Rehabilitation and Reorganisation . Assuming the plan proponent has received the nec - essary votes to consensually confirm the Chapter 11 plan or sufficient votes to attempt to cram-down the Chapter 11 plan on a dissenting creditor class, the bankruptcy court holds an evidentiary hearing to determine whether the plan contains the 11 USC Section 1123 (a)-required provisions and satisfies 11 USC Section 1129’s requirements, including separate requirements under Section 1129 (b) that apply only in a cram-down. To confirm a Chapter 11 plan, Section 1129 (a) requires: • the plan to comply with all applicable provisions of the Bankruptcy Code; • the plan proponent to comply with applicable pro - visions of the Bankruptcy Code; • the plan be proposed in good faith and not by any means forbidden by law; • bankruptcy court approval of any payments made by the plan proponent, the debtor or any person issuing securities or acquiring property under the plan;
• disclosure of the identity and affiliations of any indi - viduals who will serve as officers, as directors or in key positions following confirmation; • approval from the governmental regulatory com - mission with jurisdiction of any proposed changes in post-confirmation rates (if such are charged and subject to government regulatory approvals); • the plan to provide that any holder of a claim or interest in an impaired accepting class that did not vote to accept the plan will receive or retain prop - erty of a value not less than it would receive if the debtor were liquidated in a Chapter 7 case; • the plan to provide any secured creditor properly electing to retain its lien and have its entire claim treated as a secured claim under Section 1111 (b) (2), with property equal to the value of the creditor’s collateral as of the plan’s effective date; • each class under the plan to accept the plan or be unimpaired; • payment in full in cash of the allowed amount of administrative expense claims and certain other priority claims, unless the holders of such claims agree to different treatment; • one impaired class of claims accepts the plan with - out counting the votes of insiders; • confirmation is not likely to be followed by the liqui - dation, or the need for further financial reorganisa - tion, of the debtor or any successor to the debtor under the plan, unless such liquidation or reorgani - sation is proposed in the plan; • all fees payable to the UST must be paid; and • the continuation and payment of all retiree benefits, if required, for the duration of time the debtor has obligated itself to provide such benefits. The terms of a confirmed Chapter 11 plan may release non-debtor parties from actual or potential claims held by the debtor against such parties, approval of which may be dependent on the bankruptcy court and juris - diction. 4.3 The End of the Restructuring, Rehabilitation and Reorganisation Procedure If a proposed Chapter 11 plan satisfies the Bankruptcy Code’s confirmation requirements, the court will enter “Findings of Fact and Conclusions of Law” confirming the Chapter 11 plan. The debtor and other parties-in- interest then work towards a plan “effective date” –
520 CHAMBERS.COM
Powered by FlippingBook