The Unresolved Dilemma of Creditors' vs. Stakeholders' Rights

A benefit corporation is a new form of corporate entity, and its directors are required to consider the impact of their decisions on stakeholders. Under the model benefit corporation law, stakeholders include shareholders, but also specifically include its employees and workforce, customers, communi...

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Bibliographic Details
Published in:American Bankruptcy Institute journal 2013-05, Vol.32 (4), p.58
Main Authors: Schildhorn, Gary M, Keilson, Brya M
Format: Article
Language:English
Subjects:
Bankruptcy
Bankruptcy laws
Beneficiaries
Bids
Capitalism
Collateral
Directors
Federal court decisions
Federal courts
Fiduciary responsibility
Health care
Injunctions
Legislation
Nonprofit hospitals
Stakeholders
State court decisions
State laws
Stockholders
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Summary:A benefit corporation is a new form of corporate entity, and its directors are required to consider the impact of their decisions on stakeholders. Under the model benefit corporation law, stakeholders include shareholders, but also specifically include its employees and workforce, customers, community and social factors, the local and global environment, the short- and long-term interests of the benefit corporation and the ability of the corporation to accomplish its stated benefit purpose. Creditors are excluded from the list of stakeholders. As explained by the drafters of the model legislation, this omission was intentional because existing state law is already available to creditors to protect their interests. This article explores the complex dilemma faced by corporate directors of benefit corporations and bankruptcy courts should an insolvent benefit corporation seek approval to sell its assets under § 363 of the Bankruptcy Code in a situation where two bids are received.
ISSN:1931-7522