Who runs the company during the case
In most Chapter 11 corporate bankruptcy cases, existing management keeps operating the business as debtor in possession, but its decisions now answer to the court and to creditors. Transactions outside the ordinary course of business, such as selling major assets or taking new financing, need court approval. A creditors' committee is commonly appointed in larger cases and can investigate the company's affairs, and if management is accused of misconduct, a party can ask the court to appoint a trustee or an examiner. Boards sometimes add independent directors before or during the case to handle conflicted decisions, especially those involving insiders or affiliates.
Contracts, people, and equity
The company can generally choose to keep or reject leases and contracts that are still being performed, and rejection leaves the other side with a damage claim rather than an ongoing deal. Employees usually keep working and are paid in the ordinary course, certain pre-filing wage claims receive priority, and retention bonuses for insiders are restricted. Shareholders sit at the bottom of the priority ladder, and in many cases they receive little or nothing unless creditors are paid in full or agree to a different split. Directors and officers often look at their insurance early, since policy proceeds may be contested between them and the estate.
Decisions the board makes at the outset
Before filing, a corporate board decides whether it is aiming for a reorganization that keeps the company together, a sale of the business, or an orderly liquidation inside Chapter 11. It also looks at related entities, since affiliates often file together and their intercompany claims need attention. Personal exposure of officers, such as guarantees or tax obligations that can follow responsible individuals, should be reviewed separately and sometimes with separate counsel. In a first meeting we map who holds what claims against the company, which relationships the business needs to keep, and what a confirmable plan might look like.
