Feature: Executive Compensation Issues under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)
by: Gary M. Kaplan
Howard Rice Nemerovski Canady Falk & Rabkin, PC; San Francisco
BAPCPA significantly modified federal bankruptcy law, imposing significant restrictions on the payment of retention bonuses, severance pay and other amounts to executives of a company in bankruptcy. These new statutory provisions apply to bankruptcy cases commenced on or after Oct. 17, 2005. In addition, BAPCPA works to undo certain executive compensation programs implemented prior to a bankruptcy filing. This article discusses the changes to prior law made by BAPCPA with respect to executive retention and severance payments, early case experience under BAPCPA and pending legislation to close perceived loopholes that have emerged in post-BAPCPA cases.
by: Sharon L. Levine and S. Jason Teele
Lowenstein Sandler PC; Roseland, N.J.
Section 1113(c) of the Bankruptcy Code sets forth the requirements that debtors must satisfy before a bankruptcy court can authorize rejection of a collective bargaining agreement (CBA). Fundamentally, to meet the requirements under §1113(c), the debtor bears the burden of making a proposal for necessary changes in the CBA including providing the union with complete and reliable information about its business plan and financial condition to enable the union to analyze the proposal, negotiating with the union in good faith over the debtor’s proposal and showing that the union rejected the debtor’s proposal without good cause. Recently, in the airline, chemical and auto industries, debtors have used §1113(c) as a tool to restructure employee and pension liabilities.
by: Israel Goldowitz
Pension Benefit Guaranty Corp.; Washington, D.C.
Title IV of ERISA sets forth the exclusive means for terminating a PBGC-insured pension plan: (I) an employer-initiated (voluntary) standard termination of a fully-funded plan or distress termination of an underfunded plan, and (II) a PBGC-initiated (involuntary) termination of an underfunded or abandoned plan. 29 U.S.C. §§1341(a)(1), 1342(a); see Hughes Aircraft v. Jacobson, 525 U.S. 432, 446 (1999).