The Role of the Court Officer in Insolvency Proceedings International Association of Korean Lawyers Conference September 21, 2019 Seoul, Korea

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Bankruptcy Code Section Chapter 11 Officers Debtor in Possession Chief Restructuring Officer Chapter 11 Trustee Post Confirmation Trustee Bankruptcy Code Section 11 U.S.C. § 1107 11 U.S.C. § 363 11 U.S.C. § 1104 11 U.S.C. § 105(a) Automatic Vesting of Trustee-Like A Business Judgment Rule Cause Exists; or Best Interest of Creditors Best Interest of Creditors Legal Standard WILMINGTON NEW YORK LOS ANGELES SAN FRANCISCO COSTA MESA www.pszjlaw.com

Primary Roles/Powers of U.S. Insolvency Officers – Ch. 11 Debtor in Possession 11 U.S.C. § 1107(a) Debtor remains in possession and control of its businesses, including management decisions, as the debtor-in-possession (DIP). Automatically vested with trustee powers. Chief Restructuring Officer 11 U.S.C. § 363(b) Becomes an officer of the Debtor with managerial control, but powers are only as broad as vested by Board of Directors. Chapter 11 Trustee 11 U.S.C. § 1104(a) Divests the DIP of power; Debtor no longer has managerial control. Appointed by Court under unusual circumstances. Examiner 11 U.S.C. § 1104(C) Court appointed for a specific purpose. Reports findings to the Court. Also rare. Post Confirmation Trustee 11 U.S.C. § 1123(b) Contractually set powers as agreed upon by the debtor and the key constituents. Typically, the Post Confirmation Trustee steps into the shoes of the debtor for litigating claims, gathering/disbursing assets, and winding down the estate. WILMINGTON NEW YORK LOS ANGELES SAN FRANCISCO COSTA MESA www.pszjlaw.com

The Debtor in Possession DIP is automatically vested with all of the rights and powers of a trustee that has been appointed by the Court. 11 U.S.C. § 1107. As a trustee, the DIP is expected to act as a trustee would act, i.e., as a fiduciary for all creditors. Unless authority is taken away from the DIP by order of the Bankruptcy Court, the company’s owners retain control of the company and day-to-day management decisions within the ordinary course of business can generally proceed as per usual under a chapter 11 filing. The DIP also has many of the other powers and duties of a trustee, including the right, with the court's approval, to employ professional persons, including professional liquidators and chief restructuring officers to assist the debtor during its bankruptcy case. WILMINGTON NEW YORK LOS ANGELES SAN FRANCISCO COSTA MESA www.pszjlaw.com

Chapter 11 Trustee “At any time after the commencement of the case but before confirmation of a plan, on request of a party in interest or the United States trustee, and after notice and a hearing, the court shall order the appointment of a trustee— (1) for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management . . . ; or (2) if such appointment is in the interests of creditors, any equity security holders, and other interests of the estate. . . . .” 11 U.S.C. § 1104(a). WILMINGTON NEW YORK LOS ANGELES SAN FRANCISCO COSTA MESA www.pszjlaw.com

Examiner: 11 U.S.C. §1104(c) The appointment of an examiner in a chapter 11 case is rare and used as an alternative to the appointment of a chapter 11 trustee. The role of an examiner is generally more limited than that of a chapter 11 trustee. The examiner is authorized to perform specified investigatory functions defined by the Court and is required to file a statement of any investigation conducted. WILMINGTON NEW YORK LOS ANGELES SAN FRANCISCO COSTA MESA www.pszjlaw.com

Post-Confirmation Trustee Under section 1123(b) of the Bankruptcy Code, a plan of reorganization may provide for the creation of a post-confirmation trust. 11 U.S.C. § 1123(b)(3)(B). A post-confirmation trust is a distinct legal entity generally formed for the benefit of a debtor’s unsecured creditors, which is charged with tasks such as prosecuting certain causes of action (often including avoidance actions), liquidating any remaining assets, objecting to claims, and making pro rata distributions to the trust’s beneficiaries. A post-confirmation trust is a creature of contract between key stakeholders, subject to approval of the Court. WILMINGTON NEW YORK LOS ANGELES SAN FRANCISCO COSTA MESA www.pszjlaw.com

Chapter 7 Trustee Upon the commencement of a case under chapter 7 of the Bankruptcy Code or a conversion of the case from chapter 11 to chapter 7, the Bankruptcy Code mandates that the Office of the United States Trustee (UST) appoints a chapter 7 trustee. 11 U.S.C. § 701(a)(1). The UST, which is a governmental oversight body of the United States Department of Justice, maintains a panel of trustees that meet certain eligibility requirements under section 321 of the Bankruptcy Code and security clearances. Upon the appointment of the chapter 7 trustee, like the chapter 11 trustee, the company is divested of control. The chapter 7 trustee is vested with the authority to manage the affairs of the company. WILMINGTON NEW YORK LOS ANGELES SAN FRANCISCO COSTA MESA www.pszjlaw.com

SHIRLEY S. CHO Tel. 310.277.6910 scho@pszjlaw.com 10100 Santa Monica Blvd., 13th Floor Los Angeles, CA 90067-4003 Shirley is a partner with 20+ years of experience representing debtors, official creditors’ committees, creditors, and purchasers across all industries.  She has represented some of the largest companies in America in connection with multi-billion corporate restructuring efforts, as well as acquirers of assets out of bankruptcy, and dozens of official committees of unsecured creditors across a variety of industries. Ms. Cho also has significant experience representing U.S. debtors involved in cross-border proceedings and has also represented foreign creditors, including Fortune Global top 20 companies, to successfully pursue their claims in chapter 11. Ms. Cho recently advised a South Korean creditor that was owed over $1 billion in pursuing its claim, which was the single largest claim, in the largest chapter 11 case filed in 2017. The representation successfully concluded in 2018. An active member of the community, Ms. Cho was recently appointed to the Board of Trustees of the University of California, Hastings College of the Law. Ms. Cho has also served as co-chair of the American Bankruptcy Institute Battleground West and the 2016 Annual Insolvency Restructuring Advisors. Ms. Cho has won numerous accolades including being named as one of The Best Lawyers in America, Super Lawyers, and Top Women Lawyers. Shirley has written and lectured extensively on U.S. bankruptcy law. Shirley began her career as a law clerk for the Honorable John E. Ryan, United States Bankruptcy Court, Central District of California and Ninth Circuit Bankruptcy Appellate Panel. Shirley is admitted to practice in California and New York and holds a B.A. degree, magna cum laude, from the University of California, Berkeley. WILMINGTON NEW YORK LOS ANGELES SAN FRANCISCO COSTA MESA www.pszjlaw.com

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