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Shareholders are Increasingly Likely to Have a Say in a Company's Bankruptcy Plan

Posted on in Corporate Bankruptcy
Shareholders are Increasingly Likely to Have a Say in a Company's Bankruptcy Plan

When companies are owned by the public through shares of stock, the company is known as a publicly held company. The individuals who own shares in the company are known as shareholders and these individuals are partial owners of the company. Increasingly, shareholders are demanding a say in their companies' bankruptcy choices.

A recent piece published by the Wall Street Journal discusses this phenomenon, which is occurring primarily with shareholders of energy, coal, and other commodities-based companies. In many cases, companies that file for Chapter 11 bankruptcy are sold at prices that cannot cover their debts, leaving shareholders with nothing. In the cases discussed in the piece, shareholders are standing up for their rights to at least have some say in their companies' negotiations, stating that these companies are often worth more than they are sold for and that if they were sold for fair prices, the shareholders could potentially recover some of their money. They also state that they should be able to have their interests represented in cases where there is a problem to blame for the company's failure, such as mismanagement.

What Happens if Shareholders are Given a Say in Bankruptcy Proceedings?

The article states that if a judge grants shareholders the right to involvement in their companies' bankruptcy proceedings, they will be granted committee status. This means that a company's collective body of shareholders would be represented by one or a few lawyers during the bankruptcy process, rather than individual shareholders advocating for themselves or being represented individually. With committee status, the shareholders can also receive compensation for their legal costs through their company's bankruptcy settlement.

Shareholders' Rights

Generally, a shareholder is notified of a company's bankruptcy through his or her broker. He or she may also receive notification of the bankruptcy in the mail.

Shareholders are entitled to receive a summary of the company's disclosure statement about the bankruptcy and information about how to file an objection to the company's reorganization plan, if the shareholder objects to the plan. Shareholders have this right regardless of whether they vote on the company's reorganization plan or not. If the shareholder does have the right to vote on the bankruptcy plan, he or she will receive a ballot and instructions for completing it alongside these materials as well as information about the date, time, and location of the company's bankruptcy hearing.

Work with an Experienced Grays Lake Bankruptcy Attorney

If you are a business owner considering filing for bankruptcy or you are a shareholder of a company whose owners are planning to file for bankruptcy, speak with an experienced bankruptcy lawyer to determine all of your rights during this process. Bankruptcy is no small step to take and when a company files for Chapter 11 bankruptcy, many lives are impacted. To learn more, contact our team at Newland & Newland, LLP today to schedule your initial consultation in our Chicago office. We are located in the prestigious 180 North LaSalle Street building.

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