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Los Angeles Corporate & Securities Law Blog

When is a debt discharged in Chapter 11 bankruptcy?

At the heart of Chapter 11 bankruptcy is the reorganization plan. A reorganization plan lays out the classification of claims and then specifies how each claim is going to be treated under the reorganization plan. Where the claim is impaired -- that is, the creditor will be paid less than the full value of their claim under the plan -- the creditor votes on the plan through a ballot. The ballots are collected by the court and tallied, and the court conducts a confirmation hearing to determine whether the plan should be approved or not after all the necessary documents are filed.

The biggest benefit of Chapter 11 bankruptcy for business owners is that the business can stay alive and running, and creditors are paid back over time. Accordingly, Los Angeles residents might then want to know when the debtor's debts are discharged.

Rapper files for Chapter 11 bankruptcy

Many business owners may be surprised to hear that filing for bankruptcy has its benefits, and often those who end up filing consider it necessary to do so to continue with their business ventures. This is the view that famous rapper, entrepreneur and investor 50 Cent voiced recently, as his Chapter 11 bankruptcy filing made the headlines.

As California residents may have read previously on this blog, Chapter 11 bankruptcy is known as a business reorganization, and it allows the filer to retain control and possession of its assets and entities under the court's supervision. The filer files a reorganization plan with court that it is supposed to follow, and the business continues running.

What is debtor in possession in a California Chapter 11 filing?

Everyone in California who operates a business understands the risks involved, and the possibility that it may be necessary at some point to file for business bankruptcy. Many of the terms and details regarding a Chapter 11 filing can be confusing to the layperson. Understanding what it means to file for bankruptcy and what certain terms like "debtor in possession" mean is important. Not having a full understanding can lead to mistakes being made, and could even cause the debtor to move forward with the wrong type of bankruptcy.

In general, a Chapter 11 is used for business reorganization. This could be any kind of business from a partnership to a sole proprietorship to a corporation. If, for example, the corporation is going bankrupt, the shareholders are not in danger other than the amount they invested. The corporation will be the debtor. With a sole proprietorship, the owner is the debtor and there is no separate identity. Therefore, the business and personal assets will be at stake in a sole proprietorship bankruptcy. With a partnership, there is a separation among the partners, and the partners are the ones in debt. It is possible that their personal assets could be used to pay creditors.

What does it mean to go public?

In the quest of forging a path similar to that of big tech companies, Los Angeles entrepreneurs may contemplate going public with their company within a few years of its emergence. Going public means that the company's stock is traded in the market and requires lining up an investment bank as an underwriter. Usually smaller, less capitalized companies prefer trading on the Nasdaq Capital Market.

The first thing that must be done before an initial public offering is to compile all documents to comply with the Securities Exchange Commission's requirement of preparing an Initial Public Offering prospectus. Many businesses may consider consulting an experienced professional at this time, as not only is the law surrounding these matters complicated, it is also a tedious process.

Avoid compliance issues during a merger with attorney's help

As discussed in last week's post, there are a number of reasons different companies decide to merge with one another. Some of these reasons include strengthening their own products by merging with a competitor company or merging with a complementary company to expand their market.

Whatever the reason, there is little doubt that mergers affect not only the companies involved, but they also affect the market and the consumer. To ensure that consumers are not taken advantage of and that the merger is legal, these complex business transactions are monitored not just by one federal agency, but by two: the Department of Justice and the Federal Trade Commission. For companies, this means they must ensure compliance with numerous regulations and stay on top of changing laws.

Why do companies merge?

Readers of the Los Angeles Corporate and Securities Law Blog may have read about various companies merging, such as last week's post about a merger causing a jump in stock. However, readers may not be entirely sure what a merger is or why companies decide to merge with one another.

A merger is when two or more companies combine with one another. Usually these two businesses are equal in size and power and have decided to move forward as one business. One of the major reasons companies decide to merge is because it helps save on costs of production. In fact, where the two companies were previously competitors, it may end up being a strategic alliance. It is also one way for companies to engage in fund formation that can assist companies in entering a new market or to launch a product it could not have done otherwise.

Standard Pacific, Ryland Group announce merger, stock jumps

Los Angeles is home to some of the most innovative and powerful companies in the world. Another way to boost the value and power of a company is to merge with an equally powerful company, thereby creating a larger, more diversified, and, in some cases, a more profitable company. Two such southern California-based companies have decided to combine into one, creating a larger home building and designing company to meet consumer demands. Stock prices for both companies jumped in lieu of the merger news.

The beauty of the merger between the two companies is that each company focuses on a niche market. This means that when merged, the newly formed company will cover the majority of the home-building and designing market. In a press release, the representative for the companies said that the deal would give the newly merged company a more diversified product line and wider geographic reach. The two companies have yet to decide on a name for their recently merged business.

What federal and state laws regulate the sale of securities?

Last week on our blog, readers learned the basics of securities and their value on the stock market. Since securities and matters involving them are heavily regulated by both federal and state legislature, it is important to know what laws and regulations apply to securities transactions.

The first securities law enacted by Congress was the federal Securities Act of 1933.The public offering and sales of securities in interstate commerce are regulated by this law. The Securities Exchange Act of 1934, also enacted by Congress, created the Securities Exchange Commission and tasked it with the job of administering federal laws. Through various provisions, the Commission has been entrusted with the job to maintain markets that are both honest and fair and to protect investors and the public by forbidding deceptive and manipulative practices.

An overview of securities

Many Los Angeles residents may have heard of the terms 'securities' and 'security trading' before but may not be aware what the terms mean. Notes, treasury bonds, certificates of interest, bonds and transferable shares and investment contracts are all examples of securities. But what, exactly, is a security?

On its own, a security is not valuable. Their value is derived from the claims the owner can make on other assets and earnings of the issuing party and the voting power that comes with the claims. This means that their value is dependent on the issuing party's financial condition, product and markets, and the competitive and regulatory market, among other things. This makes securities laws and regulations very important, as they aim to ensure that investors get the most accurate information about their investments, including the type and value of their interest.

We competently guide our clients through business bankruptcy

Los Angeles business owners know that the futures of many are intertwined into the success of their business. Not only are they themselves depending on the business' success, but all their employees are also counting on them for their salaries and benefits. When a business or company is doing well, everyone benefits from it, but when they are plagued with cash flow problems, everyone suffers from it together.

As previously discussed on this blog, one way to get rid of creditors is to declare commercial bankruptcy or individual bankruptcy, depending on the type of business you own. Business reorganization or a liquidation of assets may be one way to get financial matters back on track before it's too late.