Companies on the verge of bankruptcy are increasingly appointing independent directors to the board as they prepare for bankruptcy filing, but their neutrality is contested by creditors, lawyers and scholars.
Both companies label these directors as indifferent experts who act to maximize the value of creditors by investigating the reasons for bankruptcy, transactions between the company and its owners, and other matters. Is included. The opinions of directors are very important to bankruptcy judges, who tend to postpone their finding that a particular settlement or transaction is fair, as evidenced by years of court rulings. ..
The problem, according to a new study, is that some of these directors are biased in favor of the company that hired them. Researchers at the University of California Hastings College of Law and Tel Aviv University said directors have financial incentives to build a reputation for being friendly to companies and lawyers who will help land similar gigs in the future. .. Study published last month..
Al Togut, a bankruptcy lawyer at Togut, Segal & Segal LLP, said these directors are independent of the company, but “thanks to the lawyers who involved them in the proceedings.”
Some creditors are paying for this “structural bias,” according to a survey of 770 large-scale Chapter 11 submissions between 2004 and 2019. Recovered for low-ranked creditors with the most losses.
Some independent directors of the bankrupt company show a bias, the study says
Source link Some independent directors of the bankrupt company show a bias, the study says