Bankruptcy bankruptcy law liquidate liquidating liquidation
If a Chapter 7 case is commenced by the filing of a bankruptcy petition, or if the case is converted from a Chapter 11 case where no Chapter 7 trustee has been appointed, then an interim Chapter 7 trustee is appointed by the US trustee from a pre-selected panel of private trustees.
A permanent Chapter 7 trustee may be elected at a creditors’ meeting held pursuant to the Bankruptcy Code, where creditors holding at least 20% of the allowable, undisputed, fixed, liquidated, unsecured claims may request and vote in an election (however, insider claimants and creditors with interests that are materially adverse to the other unsecured creditors may not request an election or vote).
What are the primary procedures used to liquidate an insolvent company in your jurisdiction and what are the key features and requirements of each?
Are there any structural or regulatory differences between voluntary liquidation and compulsory liquidation?
A debtor can liquidate in a Chapter 11 case and then use the proceeds to confirm a Chapter 11 plan.
For most corporate debtors of any size, a Chapter 11 liquidation is preferable to a liquidation under Chapter 7 of the Bankruptcy Code, because in Chapter 11 the debtor remains in possession, meaning that the debtor’s management and board control the case and the sale process.
What are the eligibility criteria for initiating liquidation procedures?
Are any entities explicitly barred from initiating such procedures?
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What is the extent of creditors’ involvement in liquidation procedures and what actions are they prohibited from taking against the insolvent company in the course of the proceedings?
As a general rule, all creditors play a limited role in a liquidation under either Chapter 11 or Chapter 7 of the Bankruptcy Code, because sales are free and clear of liens and claims, with any liens and claims attaching to the proceeds of the sale, and until the sale and automatic stay remain in effect.
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