The number of businesses seeking bankruptcy protection hit its highest level in more than two years in March, as the recession sends more companies into financial crisis, according to a story today in the Dow Jones Daily Bankruptcy Review. The 7,843 commercial bankruptcy filings in March 2009 represent a 23.2% jump
In the current economy, corporate officers and directors face an increased risk of derivative suits and other litigation against them from frustrated shareholders and other stakeholders in a corporation. Should officers and directors also be concerned about claims brought against them by their company’s creditors? The answer may depend on what state’s law applies to the creditors’ claims.
In today’s distressed retail market, the possibility of a tenant’s bankruptcy is a top concern for managers and owners of retail centers. Owners of commercial office buildings in many parts of the country are becoming increasingly concerned about tenant bankruptcies, too. Landlords need to know the options available when a tenant files for bankruptcy and should anticipate a tenant/debtor’s likely maneuvers in bankruptcy. This article provides a summary of relevant law and key strategic considerations to help landlords minimize losses and protect their interests when a tenant files bankruptcy.
Leases & “Executory Contracts”
Section 365 of the Bankruptcy Code allows a debtor (i.e., an entity that has filed for bankruptcy) to either assume or reject an executory contract or unexpired lease. This way, a debtor may decide to assume any valuable contracts and reject any burdensome ones. If a bankruptcy tenant decides to assume an unexpired lease, the lease will remain in effect through and after completion of a Chapter 11 reorganization. Assuming the lease does not mean the tenant gets to stay in the space free of charge. The tenant must cure any outstanding defaults and perform all pending obligations in the lease.
Chapter 11 bankruptcies are on the rise, and many expect that trend to continue. In the third quarter of 2008 there were 70% more Chapter 11 filings than in the third quarter of 2007, according to Automated Access to Court Electronic Records, a company that tracks bankruptcy statistics.
Experts are predicting a record number of corporate bankruptcies – from large public companies to small local-only businesses – in 2009, and possibly beyond. With corporate bankruptcies becoming more common, businesses leaders across all industries are wondering: What exactly is a Chapter 11 bankruptcy, and how does it affect my business when a customer/vendor/competitor files for bankruptcy? This post and future posts on the Louisiana Law Blog are intended to help you understand the Chapter 11 process and answer some of your business bankruptcy questions.