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How are your stakeholders treated during your bankruptcy?

If yours is a publicly traded company operating in Nashua, then your decision to file for bankruptcy on behalf of your business could bring with it a bevy of issues. Your stakeholders will likely want to know what they may expect for their stocks and/or bonds. This may depend largely on the type of investment they hold.

The first thing to understand is who may be entitled to what. Your stockholders are the actual owners of your company (you may likely be among them). Bondholders, on the other hand, will usually have an agreement to have the principal amounts that they invested returned with interest. This, in essence, places them amongst your unsecured creditors. Should you file a Chapter 7 bankruptcy, they must first wait until secured creditors are repaid through the return of their collateral. This means that the likelihood of them only receiving a fraction of the face value amounts of their bonds may be high.

You and other stockholders must hope that there is something left over from the sale of your business assets to reclaim some of the value of your stock. If you choose to file a Chapter 11 bankruptcy, however, there may be a small glimmer of hope of you recouping something on the trading market. According to the U.S. Securities and Exchange Commission, there are no laws prohibiting securities trading of companies in bankruptcy. Yet it also points out that when seeking a Chapter 11 bankruptcy, your company is unlikely to meet listing standards.

In a Chapter 11 case, your trustee may be authorized to offer new stocks and bonds to both groups of stakeholders as part of your reorganization plan. While still under bankruptcy, however, principal and interest payments to bondholders as well as dividend payments to stockholders will cease. 

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Law Office of Paul Petrillo
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Nashua, NH 03062

Phone: 603-635-4149
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