In response to the global economic turmoil that began in late 2007, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Act) introduced a broad array of regulatory reforms in the financial sector. This report focuses on the reforms in Title II of the Act, which are intended to mitigate risks posed by the failure of systemically important financial institutions. Title II directs the Administrative Office of the United States Courts (AOUSC) to study the resolution of these institutions and report on its findings. The AOUSC submitted its first three annual reports pursuant to 12 U.S.C. § 5382(e) on July 21, 2011 (First Report), July 17, 2012 (Second Report), and July 19, 2013 (Third Report). The AOUSC submits this report in compliance with the directive of section 5382(e). Beginning in July 2015, the AOUSC is required to submit reports every five years. This report to Congress was prepared with the assistance of the Federal Judicial Center.
After an introduction in Part I, the report proceeds as follows:
- Part II provides an executive summary of the report’s primary research, findings, and analysis.
- Part III describes the AOUSC’s mandate under section 5382(e) of the Act and briefly summarizes the First, Second, and Third Reports, as well as the scope of this fourth report.
- Part IV focuses on the key issue explored in this report: the provisions of the U.S. Bankruptcy Code that permit a debtor to sell all or substantially all of its assets in a chapter 7 or chapter 11 bankruptcy case. The report reviews critiques of these provisions, including proposals for reform recommended by the American Bankruptcy Institute Commission to Study the Reform of Chapter 11 (ABI Commission), and compares them to similar mechanisms for resolving financial distress through transfers under the Act and certain bills introduced in both houses of Congress in 2014. The latter mechanisms are commonly referred to as “single point of entry” proposals. This section also describes and utilizes certain original empirical data generated by the Federal Judicial Center (FJC) for purposes of the AOUSC reports under the Act.
- Part V synthesizes the various proposals for rehabilitating or resolving a distressed company through a sale process.