What’s in store for Global Brokerage under Chapter 11?
It all starts with a petition and ends with a final decree closing the case… Global Brokerage’s future now hinges upon the possible filing of contested motions, decisions of creditors’ committees and a trustee.
The peculiarities of Chapter 11 of the United States Bankruptcy Code became widely known in 2008 along with the filing for Chapter 11 bankruptcy protection by Lehman Brothers. The Forex world is now focusing again on these peculiarities, as Global Brokerage Inc (NASDAQ:GLBR) has just unveiled plans to file for such bankruptcy.
Bankruptcy under Chapter 11 is also called reorganization bankruptcy and companies often manage to emerge from Chapter 11 after a given period of time. It all starts with a petition and ends with a final decree closing the case. Of course, the process is complex and involves a number of risks. One thing is apparent: the future of Global Brokerage now hinges upon creditors’ committees, bankruptcy trustees and possible contest motions.
A Chapter 11 case typically commences with the filing of a petition with the bankruptcy court serving the area where the company has a domicile or residence. That is why, FinanceFeeds is keeping an eye on all filings by Global Brokerage in New York and Delaware. Usually, the entity also must file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a schedule of executory contracts and unexpired leases; and (4) a statement of financial affairs.
A plan of reorganization must be filed with the court. Following the eventual approval of the disclosure statement by the court, a confirmation hearing should be held to determine whether to confirm the plan.
Before confirmation of the plan, some problems may occur. Continued operation of the business may result in the filing of contested motions. Typical ones seek relief from the automatic stay, the use of cash collateral, or to obtain credit. In addition, there may also be lawsuits over unfulfilled contracts and unexpired leases.
Any delay in the filing and obtaining confirmation of a plan may drive creditors to file motions for relief from stay, to convert the case to chapter 7, or to dismiss the case altogether.
Trustees play a vital role in monitoring a chapter 11 case. The US trustee will be overseeing applications for compensation and reimbursement by professionals, plans and disclosure statements filed with the court, and creditors’ committees. The trustee will also conduct meetings of the creditors. The US trustee and creditors may question the debtor under oath.
The creditors’ committee is appointed by the trustee and usually consists of unsecured creditors who hold the seven largest unsecured claims against the debtor. A creditors’ committee can serve as a safeguard to the proper management of the business of the entity that files for protection.
At the moment of publication of this article, the electronic filing system of the US courts shows no information about any Global Brokerage’s submissions with regard to Chapter 11 protection. FinanceFeeds will be monitoring the matter and will continue to inform their readers in due course.
