M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Monday, April 12, 2010

More on Whether a Secured Creditor May Foreclose on Substantially All the Assets of a Debtor without Stockholder Approval

From a reader:


I was fortunate enough to recently be asked to research the very question you posted on the M&A Law Prof Blog on July 3, 2009 -- whether a creditor may foreclose on substantially all the assets of a debtor without stockholder approval.

[In] a transcript ruling in Gunnerman v. Talisman . . . dismissing the 271 claim [V.C..] Strine states: 


"I think the -- the Delaware General Corporation Law clearly makes a distinction between financing transactions, mortgage transactions, collateral transactions, and sales of assets. And I don't think you can have a situation where there's the original financing transaction that pledges the collateral is outside 271's reach and then say when the creditor exercises rights under that that are within the four corners or arguably a lesser -- lesser-included option, that that somehow then triggers a stockholder vote. I think that would be bad for -- frankly, for equity investors in general, because I think it would raise the cost of capital, because it would -- it would create sort of a highjack situation that you sometimes see in new bankruptcies where it appears that everybody has to get something simply because they're present."


Hope this is helpful to you and all others who, like me, visit the M&A Law Prof Blog regularly to stay on top of developments in corporate law and practice.


Best Regards,

Marcus E. Montejo


Of course, we still have my other question, what if, instead of foreclosing, the Creditor works out a negotiated settlement with the Debtor pursuant to which the loan is satisfied by delivery of substantially all the assets? 




Asset Transactions | Permalink

TrackBack URL for this entry:


Listed below are links to weblogs that reference More on Whether a Secured Creditor May Foreclose on Substantially All the Assets of a Debtor without Stockholder Approval:


Post a comment