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For companies in financial distress, retaining key employees during a Chapter 11 restructuring can be crucial for success. Key Employee Retention Plans (KERPs) and Key Employee Incentive Plans (KEIPs) are tools used to incentivize employees to stay and perform. KERPs are typically designed for non-insider employees and offer bonuses tied to restructuring milestones, while KEIPs target senior management with performance-based bonuses. Both plans aim to mitigate the uncertainty and disruption of working at a company in bankruptcy.

Structured dismissals have emerged as a viable alternative for Chapter 11 debtors seeking to exit bankruptcy without the high costs and complexities associated with confirming a Chapter 11 plan or converting to Chapter 7. This approach is particularly useful when a debtor’s assets have been sold, and the remaining funds are insufficient to justify a full plan process but can still provide some distribution to creditors. Unlike a straight dismissal, a structured dismissal offers a more controlled exit, ensuring that the interests of the debtor, creditors, and third parties are adequately protected.

Chapter 15 of the Bankruptcy Code provides a mechanism for debtors to have foreign insolvency proceedings recognized in the U.S. This recognition allows orders from foreign courts to be given effect in the U.S., offering key protections such as the automatic stay. In contrast, Chapter 11 focuses on domestic reorganization, allowing debtors to restructure their debts and business operations within the U.S. legal framework.

Financially distressed companies have several alternatives to Chapter 11 bankruptcy, including workouts, assignments for the benefit of creditors (ABC), and Chapter 7 liquidation. Each option has distinct processes and impacts on creditors, which are crucial for understanding how to navigate these situations effectively. In a workout, companies negotiate debt modifications directly with creditors, allowing the business to continue operating while restructuring its debt.

The payment stablecoin (PS) legislative endgame is near. There is a clear imperative from the White House to prioritize stablecoin legislation and preserve the U.S. dollar as the world’s reserve currency. Both chambers of Congress are forming a working group to deliver a clear regulatory framework for digital assets. Bipartisan agreement appears within reach.

Chapter 11 plans often include various releases, some favoring the debtor and others benefiting nondebtor third parties. While creditors are bound by a Chapter 11 discharge, they have options regarding third-party releases. Understanding these releases is crucial for creditors to protect their interests. The Chapter 11 discharge releases the debtor from most past debts, providing a fresh start. Creditors cannot opt out of this discharge but must file a proof of claim for any pre-petition or post-petition claims before the applicable bar dates to ensure their claims are treated under the plan.

We find ourselves in the midst of a raucous debate among sanctions practitioners about the impact of the Fifth Circuit’s recent decision upholding a challenge against the sanctions the Office of Foreign Assets Control (OFAC) imposed on Tornado Cash, a cryptocurrency “mixer.” Does this case presage a sea change in how OFAC’s sanctions will apply to new technologies that may not clearly fall within the bounds of the agency’s 1970s-era statutory authority? Or is the Fifth Circuit’s ruling likely to be overturned, merely a statement of the obvious, so unclear as to have minimal real world impacts, or otherwise just a blip in the decades-long trend of judicial deference to OFAC?

You Are Invited: SEC Enforcement Priorities Webinar

Thursday, February 6, 2025 | 12:00 – 1:00 pm ET

Please join Troutman Pepper Locke for a discussion hosted by the Atlanta Bar Association with Regional Securities and Exchange Commission Directors Nicholas Grippo (Philadelphia Regional Office) and Nekia Jones (Atlanta Regional Office) on the SEC’s 2025 enforcement and examination priorities.

When an employer files for bankruptcy, employees often worry about the fate of their severance payments. Under Section 503(b)(1)(A) of the Bankruptcy Code, wages, salaries, and commissions for services rendered after the commencement of the bankruptcy case are treated as administrative expense claims. Additionally, Section 507(a)(4) grants priority status to wages, salaries, or commissions, including severance, earned within 180 days of the bankruptcy filing, up to a statutory cap. These provisions aim to protect employees’ compensation but apply to different time periods and have varying priority levels, which can impact severance payments differently.