CTP CTP Corporate Governance & Legal Compliance in Distress 2

Question 1

A key employee retention plan (KERP) during Chapter 11 is governed by which provision of the Bankruptcy Code?

Accepted Answer

Section 503(c)

Answer

Section 503(c) of the Bankruptcy Code restricts key employee retention plans, requiring court approval and limiting payments to executives of distressed companies.

Question 2

What is a 'fraudulent transfer' in the context of bankruptcy law?

Accepted Answer

A transfer of assets made with intent to hinder, delay, or defraud creditors

Answer

A fraudulent transfer is a pre-bankruptcy asset transfer made to defraud creditors or for less than reasonably equivalent value when the debtor was insolvent.

Question 3

The 'absolute priority rule' in Chapter 11 requires that:

Accepted Answer

No junior class can receive value unless all senior classes are paid in full first

Answer

The absolute priority rule mandates that in a cram-down plan, a junior class cannot receive any distribution unless all senior classes are paid in full.

Question 4

A 'stalking horse' bidder in a Section 363 sale:

Accepted Answer

Provides the initial bid that sets a floor for competitive auction bidding

Answer

A stalking horse bidder submits an initial offer establishing a minimum purchase price, providing a baseline that other potential buyers must exceed at auction.

Question 5

Which term describes a plan of reorganization negotiated and voted on by key creditors BEFORE the bankruptcy filing?

Accepted Answer

Pre-packaged plan

Answer

A pre-packaged (or 'pre-pack') plan is drafted, negotiated, and voted on by creditors before the company files for Chapter 11, minimizing time in bankruptcy.

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CTP - Certified Turnaround Professional Practice Test

CTP CTP Corporate Governance & Legal Compliance in Distress 2