February 22, 2009
New Bankruptcy Rule 2015.3 - Reporting of Non-Debtor Entities
Bankruptcy Rule 2015.3 states:
Rule 2015.3. Reports of Financial Information on Entities in Which a Chapter 11 Estate Holds a Controlling or Substantial Interest
(a) Reporting requirement.
In a chapter 11 case, the trustee or debtor in possession shall file periodic financial reports of the value, operations, and profitability of each entity that is not a publicly traded corporation or a debtor in a case under title 11, and in which the estate holds a substantial or controlling interest. The reports shall be prepared as prescribed by the appropriate Official Form, and shall be based upon the most recent information reasonably available to the trustee or debtor in possession.
(b) Time for filing; service.
The first report required by this rule shall be filed no later than five days before the first date set for the meeting of creditors under § 341 of the Code. Subsequent reports shall be filed no less frequently than every six months thereafter, until the effective date of a plan or the case is dismissed or converted. Copies of the report shall be served on the United States trustee, any committee appointed under § 1102 of the Code, and any other party in interest that has filed a request therefor.
(c) Presumption of substantial or controlling interest; judicial determination.
For purposes of this rule, an entity of which the estate controls or owns at least a 20 percent interest, shall be presumed to be an entity in which the estate has a substantial or controlling interest. An entity in which the estate controls or owns less than a 20 percent interest shall be presumed not to be an entity in which the estate has a substantial or controlling interest. Upon motion, the entity, any holder of an interest therein, the United States trustee, or any other party in interest may seek to rebut either presumption, and the court shall, after notice and a hearing, determine whether the estate's interest in the entity is substantial or controlling.
(d) Modification of reporting requirement.
The court may, after notice and a hearing, vary the reporting requirement established by subdivision (a) of this rule for cause, including that the trustee or debtor in possession is not able, after a good faith effort, to comply with those reporting requirements, or that the information required by subdivision (a) is publicly available.
(e) Notice and protective orders.
No later than 14 days before filing the first report required by this rule, the trustee or debtor in possession shall send notice to the entity in which the estate has a substantial or controlling interest, and to all holders – known to the trustee or debtor in possession – of an interest in that entity, that the trustee or debtor in possession expects to file and serve financial information relating to the entity in accordance with this rule. The entity in which the estate has a substantial or controlling interest, or a person holding an interest in that entity, may request protection of the information under § 107 of the Code.
(f) Effect of request.
Unless the court orders otherwise, the pendency of a request under subdivisions (c), (d), or (e) of this rule shall not alter or stay the requirements of subdivision (a).
The Tribune Companies have sought a modification of this requirement, for one thing, for the requirement to report on the operations of the Cubs. The request for modification can be accessed here.
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Posted by: Miriam | Feb 23, 2009 2:37:55 AM
This Rule like most of Chapter 11 is very burdensome on small business debtors. Even before BAPCPA the "benefits" of small business status was questionable. Now that those "benefits" are no longer optional, small business debtor's are on a tight time schedule and face administrative costs that are a very high percentage of the estate. This additional burden which would better be imposed on Debtor's with a certain minimum asset requirement hurts small business debtors. As a practical matter judges tend to require enough information in the disclosure statement to give creditors fair notice that this new requirement is not necessary.
Posted by: Houston Bankruptcy Attorney Alex Wathen | Feb 24, 2009 6:02:35 AM