You are sitting in your office one morning when the phone starts ringing off the hook. You quickly learn that one of your company’s major customers (who you have been shipping on credit) has just filed for bankruptcy protection under Chapter 11, and your company has been listed as one of the debtor’s 20 largest unsecured creditors. In fact, you learn that your company is the debtor’s fourth largest unsecured creditor. You are hearing from many old and current “friends” in the legal and financial advisory fields asking not for your business, but rather for your support in the bankruptcy proceedings. Specifically, you are informed that the U.S. trustee for the district where the bankruptcy was filed will be convening a meeting of the debtor’s 20 largest unsecured creditors within 10 days, and you will likely be offered the opportunity to serve on an Official Committee of Unsecured Creditors (“Committee”) in the case.
What does this mean? You have not had this “opportunity” presented to you before. As general counsel of your company, you must quickly decide whether to serve on the Committee and, if so, who to nominate as your representative, who to recommend and/or endorse as counsel for the Committee, and who to recommend and/or endorse as a financial advisor to the Committee. And perhaps at the top of your list of questions is, “What will this cost in professional fees and lost productivity by the individual(s) you ask to serve on the Committee?”