Last summer, a bipartisan group in Congress introduced H.R. 2533, the “Chapter 11 Bankruptcy Venue Reform Act of 2011.” The proposed legislation would effectively require corporations to seek Chapter 11 relief in the jurisdictions in which they have had their principal place of business (or principal assets) for at least one year, or in which an affiliate already has a bankruptcy case pending.
The proposed bill “would prevent bankruptcy courts in Delaware and New York from playing host to most of the country’s major corporate reorganizations,” says a Business Week report following the first Congressional hearings on the proposal, held in September 2011. In prepared remarks, the Hon. Frank J. Bailey, chief bankruptcy judge in the District of Massachusetts, testified that the current system “simply has not worked out the way Congress intended” by permitting companies to reorganize far from where they operate. The present scheme makes participation difficult or expensive for small creditors, vendors, employees and pensioners, Bailey added—and gives a disproportionate amount of work to the N.Y.- and Del.-based attorneys and turnaround specialists who often drive the filings.
The bill is still tied up in the Judiciary Committee. In the meantime, supporters such as the Commercial Law League of America say the act would ensure that “bankruptcy reorganization process remains within the regions and communities that have the most significant vested interest in the outcome.” Where do BV appraisers weigh in? If passed, would the Bankruptcy Reform Act provide more work for “local” valuation and insolvency specialists? E-mail your thoughts to the editor.
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