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Comparison of in Bankruptcy, , and for the Benefit of

The following charts are provided as general information regarding liquidations achieved in bankruptcy proceedings and assignments for the benefit of creditors and are not necessarily applicable in all situations. These charts are based on Georgia state and may not be applicable in all states. The references to bankruptcy and receivership are general. You should consult with an experienced bankruptcy practitioner or other expert in the field with regard to these distinct vehicles.

14 Assignments can Streamline the Liquidation Process

Issue Chapter 11 Chapter 7 Receiver Assignment

Streamlined Detailed “superstructure” code, No formal Procedures without court rules, US court rules involvement Publicity Less visible; not Public forum; filings published in minimized; not listed in paper. Publicity the press. Pleadings & financials listed in paper; Pleadings readily available on Pacer very quiet, low available. profile closure May be most Can be very Can be Expense Less expensive efficient means to expensive expensive liquidate Perceived as Perceived as Accelerated Timing slow – slow – Fast process with no possible delays possible delays court involvement

Formal established laws and Flexibility Flexible Flexible procedures

15 Assignments Fall Under State

Issue Chapter 11 Chapter 7 Receiver Assignment

Fiduciary DIP / Trustee Trustee Receiver Assignee Name

Court Federal Federal Federal or State State

Judicial/ Non- Non-judicial Judicial Judicial Judicial judicial procedure

State action; may limit ability Federal authority recognized in State or Federal Jurisdiction to sell assets in all states Court other states and effect

Specific/ Specific/ Law Vague / Broad Vague / Broad Detailed Detailed

16 Reduced Oversight Layer of Expense

Issue Chapter 11 Chapter 7 Receiver Assignment

Counsel and Additional layer of Financial No committee No committee No committee Consultants to professionals Committee US Trustee Oversight / Judge US Trustee Judge None Supervision Creditors’ Judge Committee

Fees Yes, US Trustee No No No

17 Chooses Under an Assignment

Issue Chapter 11 Chapter 7 Receiver Assignment

Creditor Yes Typically No No No Committee

No ( Yes (debtor Debtor’s right No (panel DIP is fiduciary generally chooses fiduciary to choose trustee or Trustee recommends to serve as appointed) fiduciary? appointed by US the receiver) assignee) Trustee

No (can elect No – but at 341 meeting Committee may if claimants Creditor’s Yes (subject to No (generally make representing right to choose court selected by recommendation 20% of $ approval) debtor) fiduciary? to the claims elect US Trustee candidate by majority vote)

18 Maximize Value Under ABC

Issue Chapter 11 Chapter 7 Receiver Assignment

Assets sold Assets sold Stigma of outside of outside of Stigma of Chapter 7 “bankruptcy” “bankruptcy” Asset yield bankruptcy liquidation may yield may yield higher returns higher returns Yes, debtor knows Yes, receiver Yes, but panel business, though able to Yes, assignee trustee may not has restraints of maximize value may be more Maximize know business time delays and but may not sophisticated and may not asset value organized creditors have same and able to move quickly to committee, which incentive as move quicker maximize value may impact value. assignee Retain Yes No Yes Yes value

19 ABC Fee Structure Based on Size of

Issue Chapter 11 Chapter 7 Receiver Assignment

Not required unless specified Typically Not required Fee application Periodic fee in order; submitted at unless set forth in applications generally served procedures end of case assignment deed on parties in the case

May be Trustee Trustee Hourly; no cap. combination of Fiduciary Fee commission - commission - May have fixed fee and Limited by Limited by alternative fee structure percentage of 326(a) 326(a) structure sales

20 Executory and Leases Must be Renegotiated

Issue Chapter 11 Chapter 7 Receiver Assignment

Assignment of No statutory No statutory Yes Yes executory provision provision contracts Rejection of Yes, automatic Yes No No executory after 60 days contracts Yes; landlord Yes; landlord claim limited claim limited Reject leases pursuant to pursuant to No No 502 (b) (6) 502 (b) (6) Assign IP Yes Yes No No contracts Assign No, unless sale of company as a No No software whole under a 363 sale licenses 21 Established Priority of Claims

Issue Chapter 11 Chapter 7 Receiver Assignment

Established No, but Receiver No, but Assignee may look to may look to Yes Yes Creditor bankruptcy code bankruptcy code priorities for guidance for guidance

Employee Yes, priority claims up to No, but Receiver No, but Assignee maximum of $10,000 may borrow may look to claims from the bankruptcy code defined per Section 507(a) (4) bankruptcy code for guidance

Benefit plan Yes, provision for priority No No claims payments to a benefit plan

22 Reporting Minimized Under Assignment

Issue Chapter 11 Chapter 7 Receiver Assignment

At request of At request of Financial Monthly Annual Court or Court or Reporting financial report financial report discretion of discretion of Receiver Receiver List of assets Debtor’s attached to deed; schedule of Required to be filed with signed affidavit Not required assets & bankruptcy court that all assets liabilities turned over to assignee Yes – but Yes – case generally under Judge may No, unless any required specific bond Chapter 7 require, but not three creditors required trustee general always request bond bond

23 Some Tools Not Available Under ABC

Issue Chapter 11 Chapter 7 Receiver Assignment

No, Receiver No provision in may file GA; assignee or Preference Yes, Section 547 Avoidance petition and creditor may file Powers claims pursue petition to pursue preferences preferences Yes Yes Fraudulent Bankruptcy Yes Yes Bankruptcy laws laws Section State law State law conveyances Section 548 548

Recharacter- Yes, meet nine Yes, meet nine ization of Roth Steel Roth Steel No No to Factors Factors No specific Equitable Subordination provision; pursuant to pursuant to may be No provision Subordination Section 510 (c) Section 510 (c) modeled same as bankruptcy 24 Debtor Not Involved in Wind Down Under ABC

Issue Chapter 11 Chapter 7 Receiver Assignment

May operate as Must attend DIP; must 341 hearing None, but must Debtor’s official attend 341 and be sign affidavit None involvement hearing and be questioned by attesting to questioned by creditors assets creditors Director liability Ceases on Ceases on for continuing to Ceases on Ceases on receiver assignment of petition filing petition filing run an insolvent appointment assets company

25 Debtor Continues to Manage Tax Issues in ABC

Issue Chapter 11 Chapter 7 Receiver Assignment

Shareholder prepares as they DIP / Trustee Trustee Receiver retain right to Tax Returns prepares prepares prepares “shell”; only assets assigned in ABC

Reversion from Taxed (50% Exclusion to Taxed (50% Taxed (50% plan excise tax) 50% excise tax excise tax) excise tax)

26 Assignee has Rights of Creditor Under ABC

Issue Chapter 11 Chapter 7 Receiver Assignment

Meeting of Yes Yes No, but No Assignee may Creditors 341 meeting 341 meeting arrange Can creditors file an Yes, may have started the Yes Yes involuntary process petition? Rights of lien Yes, per Yes Yes No creditors UCC 9-309 No, typically a No, but assignee court may enter has rights of lien Creditors such an order creditor under enjoined from Yes, pursuant to enjoining action UCC 9-309 Section 362 with the same collection providing effect as efforts benefits of bankruptcy automatic stay automatic stay

27 Other Issues for Assignee to Consider

Chapter Issue Chapter 7 Receiver Assignment 11 Assignment Environmentally Trustee not on title to . Receiver not in recorded in deed; Estate must deal with claims distressed chain of title assignee may be and effect on value in chain of title Generally no, Generally no, but may for a Continue but may if Yes short period to Yes necessary to operations preserve value preserve value of estate Management No, KERPs No Yes, Flexible Yes, Flexible Retention Limited Agreements No, but assignee may seek Indemnification No, No, indemnification No from creditors not necessary not necessary if assignee continues to operate business 28 ABC Provides Distinct Benefits to Secured Creditors

Issue Chapter 11 Chapter 7 Receiver Assignment

Sale by receiver or assignee avoids Advantage to the possible contention by a No issues regarding the sale in a guarantor that a ’s secured commercially unreasonable manner creditor collateral was liquidated in a commercially unreasonable manner Environmental issues: Buffer for Buffer for Buffer for Buffer for secured creditor secured creditor secured creditor secured creditor Advantage to if environmental if environmental if environmental if environmental secured issues arise issues arise issues arise issues arise creditor Panel trustee No duty to No duty to Duty if only Bankruptcy should abandon abandon assets abandon assets benefit is to court not used if assets if only if only benefit is if only benefit is only benefit is to secured benefit is to for secured for secured secured creditor creditor secured creditor creditor creditor

29 Extended Payments Managed at Lower Cost in ABC

Issue Chapter 11 Chapter 7 Receiver Assignment Benefit if Yes, no added Extended No, costs No, costs No, costs court cost; less continue to continue to continue to expense than Payment accrue accrue accrue continued court Terms proceedings

Sale to insider Not prohibited Not prohibitedNot prohibited Not prohibited

30 Other Issues Related to Secured Creditors

Issue Chapter 11 Chapter 7 Receiver Assignment

Must have consent; Sale of secured May seek action to sell over Must have assignee may creditor’s objection of secured creditor consent seek consent pursuant to Section 363(f) collateral prior to assignment May use cash collateral over the Use of cash objections of secured creditor if No provision for No provision for creditor’s is adequately use of cash use of cash collateral protected under Section 361 & collateral collateral Section 363

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