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buy sell agreement in Ch 11
As the mediator I can use the information that you provided to try and get this settled. the hearing was continued. Thanks for the great questions. I am telling them that the fight with the heirs is going to eat up a great deal of money, and bk court isn't cheap either and worse yet with bk court you cannot always dismiss and walk away.
Margaret Norman, Attny
111 N. Sepulveda Blvd. #355
Manhattan Beach, Ca. 90266
310-376-7873
Fax 310-798-0846
The post was migrated from Yahoo.
Margaret:
Don't you get damages if the contract is rejected?
If K is rejected your client will be an unsecured creditor. What do you
anticipate the payout will be to unsecureds?
Can you control the unsecured class?
Corp has to deal with the absolute priority rule. You can object to plan
for violating APR until you get a sufficient settlement.
Who is inheriting the equity interest if the K is not rejected? It would
be an interesting fight to see what the judge would require the debtor do
with profits to keep from discriminating.
Your job, should you choose to accept it, is to convince the s***head who
won't pay the heirs, that the fight over the amount of the claim will be
the same in either state or bk court, very expensive. And filing a ch 11
could double or triple the costs.
d
On Wed, Feb 13, 2013 at 1:40 PM, Margaret Norman, ESQ
wrote:
> **
>
>
> Closely held Corporation considers Ch 11 because of falling profits..
> Partner holding half of the shares dies. There is a buyout provision in
> the event of death. It doesnt mention bankruptcy. Active partner is
> refusing to pay any part of the buyout and claims that it is a contract
> which can be terminated in the Ch 11. I have researched and see that a buy
> sell agreement is mentioned among the lists of executory contracts which
> can be terminated. After check of the cases, it looks like that refers to a
> contract to buy back employee stock. I realize that if the Estate sues the
> corporation before BK, that would be a judgment which would be discharged.
> The question is, can the Buy Back Agreement caused by death be a rejected
> contract? ****
>
> Margaret Norman, Attny****
>
> 111 N. Sepulveda Blvd. #355****
>
> Manhattan Beach, Ca. 90266****
>
> 310-376-7873****
>
> Fax 310-798-0846****
>
> ** **
>
> ** **
>
>
>
Margaret:Don't you get damages if the contract is rejected?If K is rejected your client will be an unsecured creditor. What do you anticipate the payout will be to unsecureds?
Can you control the unsecured class?Corp has to deal with the absolute priority rule. You can object to plan for violating APR until you get a sufficient settlement.
Who is inheriting the equity interest if the K is not rejected? It would be an interesting fight to see what the judge would require the debtor do with profits to keep from discriminating.
Your job, should you choose to accept it, is to convince the s***head who won't pay the heirs, that the fight over the amount of the claim will be the same in either state or bk court, very expensive. And filing a ch 11 could double or triple the costs.
dOn Wed, Feb 13, 2013 at 1:40 PM, Margaret Norman, ESQ <marge@margeslaw.com> wrote:
Closely held Corporation considers Ch 11 because of falling profits.. Partner holding half of the shares dies. There is a buyout provision in the event of death. It doesnt mention bankruptcy. Active partner is refusing to pay any part of the buyout and claims that it is a contract which can be terminated in the Ch 11. I have researched and see that a buy sell agreement is mentioned among the lists of executory contracts which can be terminated. After check of the cases, it looks like that refers to a contract to buy back employee stock. I realize that if the Estate sues the corporation before BK, that would be a judgment which would be discharged.ed contract?
Margaret Norman, Attny111 N. Sepulveda Blvd. #355Manhattan Beach, Ca. 90266310-376-7873
Fax 310-798-0846
The post was migrated from Yahoo.
Michael makes some good points. If the heirs of the now-dead partner own 50% of the stock, and they don't agree to the filing of the BK, and there isn't some provision allowing either stockholder to make the decision to file a BK without the other's consent, there would seem to be a deadlock among ownership, which is grounds to appoint a trustee. Maybe a motion to dismiss the case for bad faith and lack of authority to file, or to appoint trustee in the alternative, is warranted.
Joseph E. Caceres, Esq.
Caceres & Shamash, LLP
8200 Wilshire Blvd., Suite 400
Beverly Hills, CA 90211
Tel: (310) 205-3400
Fax: (310) 878-8308
E-mail: jec@locs.com
The post was migrated from Yahoo.
Yes, in a Chapter 11, the stock would be worth nothing (so the damages on
the buyback agreement is probably nothing or is an unsecured claim equal to
the proported value of the company beofre filing the bk) but who will own
the reorganized debtor? To the extent new value is provided by the active
shareholder for his 50%, the passive shareholder has the same right to
provide new value for his 50%. So assuming the passive shareholder retains
its 50%. What happens then?
My concern, and the thing that popped out at me is that Chapter 11 is being
considered, in what appears to be, solely to avoid paying a shareholder 50%
of what he bargained for.
If that is the case, I am pretty sure the passive 50% shareholder can sue
the active shareholder for breaching his duty to the (minority?)
shareholder. I also think that the costs of the Chapter 11 can be sued for
by either creditors or the passive shareholder through a derivative suit.
If I was the passive shareholder's counsel, I would push for the
appointment of a trustee. If a trustee is appointed, all attorney client
privileged communication between this active shareholder and counsel for
the bk and the counsel for the corporation is out the window.
I also think it's a crummy thing to do to someone who just died but
probably helped get the company to where it got to.
Sincerely,
Michael Avanesian
On Thu, Feb 14, 2013 at 9:12 AM, Jeffrey S. Shinbrot wrote:
> **
>
>
> Michael, doesnt equity almost always get hosed in favor of the trades
> (and higher priority claims)?****
>
> ** **
>
> *From:* cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] *On Behalf
> Of *Michael Avanesian
> *Sent:* Wednesday, February 13, 2013 11:38 PM
> *To:* cdcbaa@yahoogroups.com
> *Subject:* Re: [cdcbaa] buy sell agreement in Ch 11****
>
> ** **
>
>
>
> I have a few quick comments. ****
>
> ** **
>
> First, the corp has a buyout agreement? Or is that an agreement between
> shareholders? I don't see why a corporation is liable when the other
> shareholders don't buy someone out? Or is it an agreement where the
> corporation has to buy back the shares?****
>
> ** **
>
> Second issue is that the old equity is extinguished in a bankruptcy and
> new shares are usually issued. In an 11, what is this new equity worth?
> Depending on the circumstances, probably nothing. ****
>
> ** **
>
> What about active partners fiduciary duty? How is he protecting himself
> from a lawsuit? His duty is (usually) to maximize profits for shareholders.
> A bk to screw over a shareholder sounds baaaad!****
>
> ** **
>
> Your duty is to the corporation, right?****
>
> ** **
>
> That's all I got in the limited time I took to consider these options.
>
> On Wednesday, February 13, 2013, Jeffrey S. Shinbrot wrote:****
>
> ****
>
> Wow, great question, an executory contract is one for which performance
> remains due to some extent on both sides so, assuming death is really
> final it would seem to depend of what, if anything, else is due to be
> performed under your contract.****
>
> ****
>
> *From:* cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] *On Behalf
> Of *Margaret Norman, ESQ
> *Sent:* Wednesday, February 13, 2013 1:40 PM
> *To:* cdcbaa@yahoogroups.com
> *Subject:* [cdcbaa] buy sell agreement in Ch 11****
>
> ****
>
>
>
> ****
>
> Closely held Corporation considers Ch 11 because of falling profits..
> Partner holding half of the shares dies. There is a buyout provision in
> the event of death. It doesnt mention bankruptcy. Active partner is
> refusing to pay any part of the buyout and claims that it is a contract
> which can be terminated in the Ch 11. I have researched and see that a buy
> sell agreement is mentioned among the lists of executory contracts which
> can be terminated. After check of the cases, it looks like that refers to a
> contract to buy back employee stock. I realize that if the Estate sues the
> corporation before BK, that would be a judgment which would be discharged.
> The question is, can the Buy Back Agreement caused by death be a rejected
> contract? ****
>
> Margaret Norman, Attny****
>
> 111 N. Sepulveda Blvd. #355****
>
> Manhattan Beach, Ca. 90266****
>
> 310-376-7873****
>
> Fax 310-798-0846****
>
> ****
>
> ****
>
>
>
> ****
>
>
>
> -- ****
>
>
> Sincerely,****
>
> Michael Avanesian****
>
> Attorney and Counselor at Law****
>
> 818-817-1725****
>
>
>
>
>
> ****
>
> ****
>
>
>
Yes, in a Chapter11, the stock would be worth nothing (so the damages on the buyback agreement is probably nothing or is an unsecured claim equal to the proported value of the company beofre filing the bk) but who will own the reorganized debtor? To the extent new value is provided by the active shareholder for his 50%, the passive shareholder has the same right to provide new value for his 50%. So assuming the passive shareholder retains its 50%. What happens then?
My concern, and the thing that popped out at me is that Chapter 11 is being considered, in what appears to be, solely to avoid paying a shareholder 50% of what he bargained for.
If that is the case, I am pretty sure the passive 50% shareholder can sue the active shareholder for breaching his duty to the (minority?) shareholder. I also think that the costs of the Chapter 11 can be sued for by either creditors or the passive shareholder through a derivative suit.
If I was the passive shareholder's counsel, I would push for the appointment of a trustee. If a trustee is appointed, all attorney client privileged communication between this active shareholder and counsel for the bk and the counsel for the corporation is out the window.
I also think it's a crummy thing to do to someone who just died but probably helped get the company to where it got to. Sincerely, Michael Avanesian
Jeffrey S. Shinbrot <jeffrey@shinbrotfirm.com> wrote:
Michael, doesnt equity almost always get hosed in favor of the trades (and higher priority claims)?
The post was migrated from Yahoo.
Thanks for the help, lots of things I can explore in the mediation. I would like to help them settle this. Its just two shareholders, one died. The other is attempting to figure out a way to take over the business without paying anything to the beneficiaries,and hoping to use a Ch 11 to do it with an attorney I've never seen or heard of in BK court.
Margaret Norman
111 N. Sepulveda Bld. #355
Manhattan Beach, Ca. 90266
310-376-7873
The post was migrated from Yahoo.
charsetndows-1252
In a Chapter 11, the corporation can reject the buy sell agreement, which creates a claim for damages, which goes into the creditor body. The rejection is the equivalent of a breach just before the bankruptcy filing (which is probably essentially the same as the suing before bankruptcy and getting a judgment, or an anticipatory breach or repudiation, all the same damages). Does the buy sell contract specify the buyout price or is it to be determined by appraisal. If the price is specified, that is the damages and the claim; if the price is by appraisal, it probably won't be much, but the Court can estimate it in the claims process. The corporation/DIP then has to include the claim in the plan, along with the other claims that drove it into Chapter 11 in the first place.
Jason Wallach
jwallach@gladstonemichel.com
On Feb 13, 2013, at 11:37 PM, Michael Avanesian wrote:
I have a few quick comments.
First, the corp has a buyout agreement? Or is that an agreement between shareholders? I don't see why a corporation is liable when the other shareholders don't buy someone out? Or is it an agreement where the corporation has to buy back the shares?
Second issue is that the old equity is extinguished in a bankruptcy and new shares are usually issued. In an 11, what is this new equity worth? Depending on the circumstances, probably nothing.
What about active partners fiduciary duty? How is he protecting himself from a lawsuit? His duty is (usually) to maximize profits for shareholders. A bk to screw over a shareholder sounds baaaad!
Your duty is to the corporation, right?
That's all I got in the limited time I took to consider these options.
On Wednesday, February 13, 2013, Jeffrey S. Shinbrot wrote:
Wow, great question, an executory contract is one for which performance remains due to some extent on both sides so, assuming death is really final it would seem to depend of what, if anything, else is due to be performed under your contract.
The post was migrated from Yahoo.
I have a few quick comments.
First, the corp has a buyout agreement? Or is that an agreement between
shareholders? I don't see why a corporation is liable when the other
shareholders don't buy someone out? Or is it an agreement where the
corporation has to buy back the shares?
Second issue is that the old equity is extinguished in a bankruptcy and new
shares are usually issued. In an 11, what is this new equity worth?
Depending on the circumstances, probably nothing.
What about active partners fiduciary duty? How is he protecting himself
from a lawsuit? His duty is (usually) to maximize profits for shareholders.
A bk to screw over a shareholder sounds baaaad!
Your duty is to the corporation, right?
That's all I got in the limited time I took to consider these options.
On Wednesday, February 13, 2013, Jeffrey S. Shinbrot wrote:
> **
>
>
> Wow, great question, an executory contract is one for which performance
> remains due to some extent on both sides so, assuming death is really
> final it would seem to depend of what, if anything, else is due to be
> performed under your contract.****
>
> ** **
>
> *From:* cdcbaa@yahoogroups.com 'cdcbaa@yahoogroups.com');> [mailto:cdcbaa@yahoogroups.com]
> *On Behalf Of *Margaret Norman, ESQ
> *Sent:* Wednesday, February 13, 2013 1:40 PM
> *To:* cdcbaa@yahoogroups.com 'cdcbaa@yahoogroups.com');>
> *Subject:* [cdcbaa] buy sell agreement in Ch 11****
>
> ** **
>
>
>
>
> ****
>
> Closely held Corporation considers Ch 11 because of falling profits..
> Partner holding half of the shares dies. There is a buyout provision in
> the event of death. It doesnt mention bankruptcy. Active partner is
> refusing to pay any part of the buyout and claims that it is a contract
> which can be terminated in the Ch 11. I have researched and see that a buy
> sell agreement is mentioned among the lists of executory contracts which
> can be terminated. After check of the cases, it looks like that refers to a
> contract to buy back employee stock. I realize that if the Estate sues the
> corporation before BK, that would be a judgment which would be discharged.
> The question is, can the Buy Back Agreement caused by death be a rejected
> contract? ****
>
> Margaret Norman, Attny****
>
> 111 N. Sepulveda Blvd. #355****
>
> Manhattan Beach, Ca. 90266****
>
> 310-376-7873****
>
> Fax 310-798-0846****
>
> ** **
>
> ** **
>
>
>
>
> ****
>
> ****
>
>
>
Sincerely,
Michael Avanesian
Attorney and Counselor at Law
818-817-1725
I have a few quick comments.First, the corp has a buyout agreement? Or is that an agreement between shareholders? I don't see why a corporation is liable when the other shareholders don't buy someone out? Or is it an agreement where the corporation has to buy back the shares?
Second issue is that the old equity is extinguished in a bankruptcy and new shares are usually issued. In an 11, what is this new equity worth? Depending on the circumstances, probably nothing.
What about active partners fiduciary duty? How is he protecting himself from a lawsuit? His duty is (usually) to maximize profits for shareholders. A bk to screw over a shareholder sounds baaaad!
Your duty is to the corporation, right?That's all I got in the limited time I took to consider these options.t wrote:
Wow, great question, an executory contract is one for which performance remains due to some extent on both sides so, assuming death is really finaled under your contract.
From:
The post was migrated from Yahoo.
The only part of the contract still to be performed is to pay the money agreed upon. The deceased 1/2 owner of the corporation has performed (I would guess) by dying.
The reason this issue comes up is that I am a mediator on the panel, we don't get paid but if we can settle one more case, I think it helps everybody.
Margaret Norman, Attny
111 N. Sepulveda Blvd. #355
Manhattan Beach, Ca. 90266
310-376-7873
Fax 310-798-0846
The post was migrated from Yahoo.
Wow, great question, an executory contract is one for which performance remains due to some extent on both sides so, assuming death is really "final" it would seem to depend of what, if anything, else is due to be performed under your contract.
The post was migrated from Yahoo.