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Distressed & Restructuring Insight - March 2023 Chapter 11 Restructuring
Razeeb Hossain
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Chapter 11 is the most common bankruptcy filing for public companies, in part because its provisions allow for a corporate debtor to continue business operations and retain some control during the bankruptcy process.1

A public company debtor filing a petition to restructure under Chapter 11 can no longer manage its debts but still has functional (and potentially profitable) core business units. Generally, functional business units yield more value than the piecemeal sale of their assets.2 The bankruptcy process provides necessary “breathing room” to restructure obligations to creditors and create a sustainable balance sheet.

On first filing for Chapter 11, a company is assigned a creditor committee to represent the lenders. Shareholders participate, although not always with voting rights. The committee works with the debtor company on a reorganization plan to eventually exit bankruptcy. These committees can appoint an individual to manage the restructuring. These individuals, sometimes referred to as chief restructuring officers, wield a significant amount of influence during Chapter 11.3

The reorganization plan must reflect Chapter 11’s priorities of “order and fairness” and survive a vote of the creditor committee prior to being confirmed by the bankruptcy court.4

If the reorganization succeeds, the debtor company emerges from bankruptcy with sounder finances and potential path to profitability. If it does not, its assets are sold off in liquidation with the proceeds allocated to creditors according to priority - senior secured lenders first, junior lenders next, with common equity holders last in line.

Read more at D&O Considerations in a Chapter 7 Liquidation or Chapter 11 Restructuring


Aon is not a law firm or accounting firm and does not provide legal, financial or tax advice. Any commentary provided is based solely on Aon’s experience as insurance practitioners. We recommend that you consult with your own legal, financial and/or tax advisors on any commentary provided by Aon. The information contained in this document and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity.