|
Under the current Bankruptcy Reform Act of 1994, amended in 1995, a credit executive's decision of whether or not to serve on a court appointed unsecured creditor's committee has usually been based on the dollar value of their employer's claim against a bankrupt customer. Did the dollar value of their claim justify the time and expense of serving on the committee? As a credit executive who has served on more than a dozen such committees, chairing half of them, I can state that little, if any concern has been given to the confidentiality of the activities of an unsecured trade creditors committee. Committee members have been fairly certain that they operated under an umbrella of confidentiality provided by § 1102 of the current Bankruptcy Act.
With assistance from their counsel, unsecured trade creditors committees have engaged the services of professionals such as CPAs, attorneys, negotiated with trade unions, taxing authorities, initiated adversary preference actions and conducted other activities to preserve the integrity of the bankruptcy estate and to aid in the approval of a plan of reorganization. Their activities, meeting minutes, telecommunications and written correspondence have all enjoyed a reasonable degree of confidentiality.
However, under 11 U.S.C.A. § 1102 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which becomes effective on October 16, 2005, such confidentiality may become a thing of the past. Bankruptcy attorneys across the country are expressing concern that revised § 1002 will open the activities of unsecured trade creditors committees to the debtor and outside parties. Credit executives as well, are expressing serious concerns about serving on an unsecured trade creditors committee under revised § 1102 and the potential liabilities to which they as individuals and/or their respective employers may be subjected.
It remains to be seen how the courts will interpret revised § 1102 in bankruptcies filed after October 16, 2005. Until remedies have been identified and/or precedent set, credit executives choosing to serve on unsecured trade creditor committees should seek and follow the advice of legal counsel specializing in commercial bankruptcy.
|
