Business Bankruptcy

What is the role of the SEC in Chapter 11 bankruptcies?

When a business is struggling with debts, that business may opt for a Chapter 11 bankruptcy. Essentially, this is a reorganization bankruptcy in which the business renegotiates and restructures many of the debts that they owe so that they can get the business back on track and ideally begin operating profitably. Often, businesses operate for many years in Chapter 11, and when a business does declare Chapter 11, it can have a major impact on the value of the investment that shareholders and stockholders have made in the company. As such, while a Chapter 11 bankruptcy is going to be primarily governed by the US federal bankruptcy code, the Securities and Exchange Commission (SEC) may also play a role in setting the rules.