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SOLICITATION AND DISCLOSURE STATEMENT
Post-petition solicitation for
acceptances or rejections of a plan may be conducted only at or
after the lime that the plan (or a summary of it) and a written
court-approved disclosure statement have been sent to the holders of
the claims or interests whose acceptances or rejections arc sought.
If there is an objection to a proposed disclosure Statement, the
court conducts a hearing to determine whether it contains adequate
information;
a. Adequate information: Since the purpose of the disclosure
statement is to provide information to creditors and equity security
holders that is adequate to evaluate the plan, the Code requires
that the disclosure statement contain sufficient information, under
the circumstances, to enable a hypothetical reasonable investor
typical of holders of claims or interests of the relevant class to
make an informed decision to accept or reject the plan. The most
important factors generally considered in approving or disapproving
the adequacy of a disclosure statement are derived from several
bankruptcy court opinions, and, while they may vary from case to
case, these factors have been consolidated into one list by the
courts
(1) The events lending to the filing of the bankruptcy petition;
(2) A description of the available assets and their value:
(3) The anticipated future of the company,
(4) The source of the information stated in the disclosure
statement;
(5) A disclaimer,
(6) The present condition of the debtor while in Chapter 11;
(7) The scheduled claims;
(8) The estimated return to creditors under a Chapter 7 liquidation;
(9) The accounting method used to produce financial information and
the name of the accountants responsible for such information;
(10) The future management of the debtor;
(11) The Chapter 11 plan or a summary thereof;
(12) The estimated administrative expenses, including attorneys' and
accountants' fees;
(13)The collectibility of accounts receivable;
(14) Financial information, data, valuations, or projections
relevant to the creditors' decision to accept or reject the Chapter
11 plan;
(15) Information relevant to the risks posed to creditors under the
plan;
(16) The actual or projected realizable value from recovery of
preferential or otherwise voidable transfers;
(17) Litigation likely to arise in a non-bankruptcy context;
(18) Tax attributes of the debtor; and
(19) The relationship of the debtor with affiliates.
b. Distribution of disclosure statement: Since the information
needed by separate classes of claims or interests may vary in kind
and detail, different disclosure statements may be sent to different
classes. However, the holders of the claims or interests of any
particular class must receive the identical disclosure statement.
c. Non-bankruptcy securities laws, rules, and regulations: The
adequacy of the information contained in a post-petition disclosure
statement is determined without regard to any non-bankruptcy
securities law, rule, or regulation that otherwise would apply,
although the Securities and Exchange Commission may appear and be
heard on the issue of the adequacy of the disclosure statement.
Also, Chapter 11 includes a safe harbor provision, which insulates
from liability for violation of any applicable securities law, rule,
or regulation, a person who in good faith and in compliance with the
provisions of the Bankruptcy Code solicits acceptances or rejections
of a plan, or participates in the offer, issuance, purchase, or sale
of a security under a plan.
d. Compare—pre-petition solicitation: Acceptances or rejections of a
plan may be solicited before the filing of a Chapter 11 petition
only if the solicitation meets the disclosure requirements of any
applicable securities or other non-bankruptcy law or regulation, or
in the absence of any such law or regulation, is preceded by the
disclosure of adequate information, as defined in Bankruptcy Code
section 1125(a). Adherence to this rule could be of great
significance when an attempted extra-judicial "workout" fails, and a
Chapter 11 petition subsequently is filed.
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