A New Approach to Corporate Reorganizations

36 Pages Posted: 9 Jun 2003 Last revised: 5 May 2009

See all articles by Lucian A. Bebchuk

Lucian A. Bebchuk

Harvard Law School; European Corporate Governance Institute (ECGI); National Bureau of Economic Research (NBER)

Date Written: 1988

Abstract

This article proposes a new method of dividing the reorganization pie among the participants in corporate reorganizations. This method, I argue, can address the substantial efficiency and fairness problems that afflict the existing process of division. Under the proposed method, participants will receive certain rights with respect to the reorganized company's securities; these rights will be designed so that, whatever the reorganization value is, no participant will have a basis for complaining that he is receiving less than the value to which he is entitled. Although I propose the method as a basis for law reform, I show that it also can be used under the existing reorganization rules.

Keywords: Chapter 11, reorganization, bankruptcy, absolute priority, options

Suggested Citation

Bebchuk, Lucian A., A New Approach to Corporate Reorganizations (1988). Harvard Law Review, Vol. 101, pp. 775 – 804, 1988, Harvard Law and Economics Discussion Paper No. 37, Available at SSRN: https://ssrn.com/abstract=415161 or http://dx.doi.org/10.2139/ssrn.415161

Lucian A. Bebchuk (Contact Author)

Harvard Law School ( email )

Cambridge, MA 02138
United States
617-495-3138 (Phone)
617-812-0554 (Fax)

HOME PAGE: http://www.law.harvard.edu/faculty/bebchuk/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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