First Ruling: New Section 1104(E) May Not Be A Ticking Time Bomb After All

A fundamental premise of chapter 11 is that a debtor’s prebankruptcy management is presumed to provide the most capable and dedicated leadership for the company and should be allowed to continue operating the company’s business and managing its assets in bankruptcy while devising a viable business plan or other workable exit strategy. The chapter 11 "debtor-in-possession" ("DIP") is a concept rooted strongly in modern U.S. bankruptcy jurisprudence. Still, the presumption can be overcome. In cases involving demonstrated fraud, incompetence or gross mismanagement, or where the interests of the estate and the stakeholders in the chapter 11 case would be better served by designation of an impartial fiduciary to supplant the DIP, section 1104 of the Bankruptcy Code authorizes the court to direct the appointment of a bankruptcy trustee conferred with a broad array of powers and duties.