Business Bankruptcy–Reporting and Disclosure Requirements
Business Bankruptcy – Simplified Operating Guidelines
A "How-To" Manual
For Non-Bankruptcy Professionals
Robert S. Apfelberg, Karrie L. Bercik, Esq.
Chapter 4. Reporting and Disclosure Requirements
A. The Office of the United States Trustee
Initially, OUST must decide whether the debtor has any prospects for reorganization, in order for the chapter 11 to continue. OUST will require information about all of the property and activities of the Debtor, including: (i) each parcel of real estate owned, (ii) machinery and equipment, (iii) inventory, (iv) insider transactions, employment and compensation, (v) insurance coverage, (vi) certificates and licenses, (vii) bank statements, (viii) recent financial statements and projections, (ix) recent state and federal payroll, income and sales tax returns, and (x) lists of creditors and employees.
B. Interim Statements
Monthly operating reports ("interim statements"), prepared on a cash basis, must be submitted monthly to the bankruptcy court and OUST. The debtor’s interim statements must include: (i) a description of the bank accounts, (ii) receipts and disbursements, (iii) profit and loss, (iv) accounts receivable and payable, (v) insurance coverage, (vi) executory contract payments, (vii) secured creditor payments, and (viii) perceived progress towards reorganization.
C. The Initial Debtor Interview
OUST will arrange a private initial interview with the debtor’s: (i) senior management, (ii) operating consultants, and (iii) counsel. They will discuss their evaluation of the debtor’s prospects for reorganization and inform the debtor’s management of its reporting requirements, responsibilities and duties.
D. The 341(a) Hearing
OUST will schedule an initial public meeting of creditors called the "341(a) hearing". All of the creditors will receive notice of the 341(a) hearing. The debtor’s senior management, chief financial officer, counsel and consultant/advisor must attend and answer questions under penalty of perjury from any attendee. Typical questions include: (i) the location, description and value of all assets, (ii) the extent and type of debts, (iii) what lead to the financial difficulties and the filing, (iv) what improvements have already been done or will be initiated, (v) creditor, customer and employee responses to the filing, (vi) any intended management, personnel and responsibility changes, (vii) prospects for recovery of assets removed from the company in an inappropriate manner, and (viii) prospects and timing for filing a "plan of reorganization" or "plan".
E. 2004 Examinations
Any interested party can depose the debtor’s: (i) employees, (ii) shareholders, (iii) insiders, (iv) affiliates, (v) lenders, and (vi) entities holding the debtor’s property. During these periodically allowed depositions called "2004 examinations", interested parties may ask questions about any matter relevant to the case or to the progress toward a plan of reorganization.
F. Other Informational Disclosures
Interested parties may request additional information from the debtor. It is advisable for the debtor’s management to cooperatively present any non-privileged information that is requested. Trade secrets, customer lists and other "competitive" information should be withheld, or provided only to the OUST, or, as a last resort, to bankruptcy counsel for the unsecured creditors committee. The debtor cannot rely on the unsecured creditors committee’s confidentiality, and often not even the confidentiality of creditor’s committee bankruptcy counsel, because they are responsible to report to their client. This will require delicate negotiations.