Sales or Plans: A Comparative Account of the 'New' Corporate Reorganization

Abstract:     
In this article, Professors Stephanie Ben-Ishai and Stephen Lubben explore the recent surge in popularity of “quick-sales,” essentially the pre-reorganization plan sale of an insolvent debtor’s assets. In their examination of quick sales, the authors use the recent examples of Lehman Brothers and Chrysler to illustrate the popularity and relevance of the pre-plan sales. The authors then move on to a more detailed discussion of the quick sales process in both Canada and the United States, isolating the differences and similarities between both countries, and weighing the costs and benefits of each approach. Ultimately, the authors argue that questions of speed and certainty mark the biggest difference between the two jurisdictions, as the American approach offers greater flexibility, which is apt to facilitate quicker asset sales. However, Ben-Ishai and Lubben assert that the Canadian approach also provides significant benefits, particularly in the realm of employee protection and the ability of the monitor to act as an independent check on quick sales proceedings. Accordingly, the authors conclude that, while the American approach is advantageous in situations with exceptional time constraints, the Canadian approach under the Companies Creditors’ Arrangement Act (CCAA) is more beneficial for a typical corporate reorganization, insofar as the role of the monitor and other limitations of the CCAA will prevent overuse of the quick sales process.

Number of Pages in PDF File: 37

Keywords: corporate reorganization, bankruptcy, insolvency, chapter 11, CCAA, Companies Creditors’ Arrangement Act, 363 Sales, Chrysler, GM

JEL Classification: K2, G30, G32, G33, G34, D23, K12, K22, L51

Accepted Paper Series