Another tool in your arsenal is that you can divide the creditors into classes. While some classes,
such as secured creditors, are already defined, others can be sub-categorized. In this way, since
the rules call for over half the creditors in number and two-thirds in value to approve the proposal,
you can line up your ducks.
You can structure the proposal to gain the vote of the majority of the creditors in number by ensuring
that the "small" creditors, owed between $1 and $10,000 (for example) will be paid in full, or as close
to in full as necessary, to get their vote supporting the company’s proposal. For the value issue, there
has to be a plan on how you will work with your biggest creditors to get through the process. Always
remember that they also have a problem: their alternative in a potential bankruptcy is not positive.
This is their problem which will be used as a wedge to help you negotiate the acceptance of the proposal.
Your Shareholders
In the case of a public company or a Venture Capital-backed venture, your shareholders have been one
of your main pre-occupations.
By the time you finish the creditor protection process, your creditors may be a big part of your shareholder
base. As when you were building the company, issuing shares could be a part of the solution when you make
an offer to your creditors.
This of course can be a managed process, and that is a subject of another paper. Be that as it may, this will
be a process that you should address with any major shareholders. The attitude, both of the Courts and the
insolvency lawyers, will be that the shareholders are of no consequence. While this may be the approach that
insolvency professionals have, you have to look at the big picture - not only today, but for the future.
Ignore the Noise
Your organization is about to enter into a storm so that it can come out stronger.
During any creditor protection plan, there will be many demands and a lot of noise from inside and outside
an organization. You need to be able to ignore the noise and focus on the job at hand.
Having participated inside management during a restructuring, I know how difficult this can be, but it is only
by ignoring the noise, focusing on objectives and taking the next step in the process that you will be able to
get through this successfully.
About Newhouse Strategic Counsel Inc.
NEWHOUSE STRATEGIC COUNSEL INC. is a legal and business advisory services firm. Its activities as a
law firm, including legal representation and advice, are offered exclusively by its members who are also
authorized to practice law pursuant to the rules of a law society or bar association. NEWHOUSE STRATEGIC
COUNSEL INC. is registered as a multi-disciplinary firm with the Bar of Quebec.
About John Mavridis
John Mavridis is the President of Newhouse Strategic Counsel Inc. He is a business lawyer and consultant
solving problems for clients in Canada, the United States and Europe, specializing in the fields of corporate
finance, securities law and corporate reorganization.
John serves as a director for his corporate clients and has advised on corporate governance issues and has
mediated relationships between entrepreneurs and VC investors. As his commitment to improving his skills to
better serve his clients and community, John has completed the Directors Education Program of the Institute of
Corporate Directors and is an ICD-certified corporate director. John holds a Masters Degree in law from the
Universite du Montreal and has been called upon as a speaker on various topics including securities regulation,
continuous disclosure obligations and corporate governance issues.
For more information, please contact: John Mavridis, 1-877-807-3953, jmavridis@newhousecounsel.com
NEWHOUSE STRATEGIC COUNSEL INC . | LEGAL AND BUSINESS ADVISORY SERVICES
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The CEO’s Guide to Creditor Protection
