Readers of NACM's Credit Real-Time Blog and Advocacy page will notice that NACM has been in discussions with Senators on both sides of the aisle regarding the potential for bankruptcy reform. The first step toward opening and revising the Code was recently taken by Sen. Sheldon Whitehouse (D-RI), as he introduced the Small Business Jobs Preservation Act of 2010.
As its name implies, the bill frames the reform of the Chapter 11 process, as it applies to small businesses, as a job saving measure. Whitehouse has previously chaired a hearing, in the Senate Judiciary Committee's Subcommittee on Administrative Oversight and the Courts, entitled "Could Bankruptcy Reform Help Save Small Business Jobs," during which some high-profile witnesses suggested opening up the Chapter 12 process for use by small businesses. While the now-introduced legislation isn't an outright opening of Chapter 12 to apply to smaller firms, rather than to just small family farms and fishermen, many of its tenets are inspired by Chapter 12.
Specifically, the bill includes the appointment of a third-party standing trustee, which is taken directly from Chapter 12, and other tenets such as a provision that increases the size of what constitutes a "small business enterprise debtor," and a provision that makes a creditor deemed to consent of a proposed plan should it not cast a timely ballot after receiving notice.
NACM had met with staff in Whitehouse's office, just prior to the bill's introduction, and offered two letters iterating its support of certain principles that the association believed any bankruptcy legislation should follow. In one of the letters, NACM offered its support to the "deemed to consent" provision. "NACM believes that creditors should retain voting rights in all small business cases. However, NACM would also support changes to the Bankruptcy Code that would have a non-voting creditor deemed to consent to the proposed reorganization plan," said the letter. "Such a measure would balance the interests of creditors and debtors and make confirmation of a plan easier, thereby increasing the speed of the proceedings. It would also encourage and hopefully increase creditor participation in a case, which we believe is valuable in any bankruptcy filing."
Still, NACM's Government Affairs Committee has read the bill and will continue to consider it closely. In the meantime, negotiations on the bill continue.
NACM staff writer, Jacob Barron