If you are an interested party in a Chapter 11 bankruptcy proceeding, either as an officer/owner of the filing company or one of its creditors, business valuation could be a major concern. The valuation placed on the business affects various aspects of the Chapter 11 reorganization process. Obtaining an accurate assessment is critical to determining if a debtor company can rebound and if creditors can expect repayment.
There is no universally accepted method for making a reliable valuation, and judges are reticent about accepting methods they are not personally familiar with. For all of these reasons, parties with an interest in a Chapter 11 proceeding should retain counsel who have extensive experience in this area and are ready to scrutinize valuation methods. If necessary, your attorney should be able to propose alternatives that provide more accurate guidance. At Gates Law Group, A Professional Corporation in Fresno, Attorney Glen Gates has in-depth knowledge of various valuation theories used in Chapter 11 matters. We work tirelessly to assemble the evidence and analyze the data to produce accurate valuations that help clients achieve their objectives.
Businesses file for bankruptcy when they are insolvent and need assistance to turn their fortunes around. By insolvent, the U.S. Bankruptcy Code means the business has reached a “financial condition such that the sum of such entity’s debts is greater than all of such entity’s property, at a fair valuation….” But by whose “fair valuation,” and by using what method, is insolvency determined? The law is silent.
The business owner wants a valuation that shows the company is insolvent, so it qualifies for Chapter 11 relief. Creditors, fearing the business is not coming back, might want the valuation to show the company is solvent and capable of paying its outstanding debts completely. A struggle over valuation sometimes ensues with each side presenting its expert testimony, and the court deciding whether to deny bankruptcy protection or “cram down” the company’s restructuring plan over the creditors’ objections.
Approved methods for valuing a business in Chapter 11 include:
Whether you are a company CEO or a creditor, the stakes are high for business valuation in bankruptcy. Reaching an accurate and defensible valuation requires up-to-date knowledge, meticulous care and diligence. When you work with Glen Gates, an accomplished bankruptcy attorney, you can be confident in our firm’s ability to present a compelling case for a valuation that protects your rights and advances your interests.
Gates Law Group, A Professional Corporation represents California businesses of all sizes in Chapter 11 bankruptcy matters. Please call 559-432-9944 or contact us online to schedule a consultation. We serve clients at our main office in Fresno and locations in Paso Robles and Visalia.