WASHINGTON-A House of Representatives bill that would tighten the rules surrounding small-business bankruptcy filings could have an effect on wireless operators-particularly those new services entering a competitive marketplace-if competition and/or lack of capitalization forces them into Chapter 11 bankruptcy protection or if they take that route to tie licenses up in court.
The Gekas-Moran Bankruptcy Reform Act of 1998, introduced Feb. 3 and sponsored by Reps. George Gekas (R-Pa.), James Moran (D-Va.), Bill McCollum (R-Fla.) and Rick Boucher (D-Va.), “is designed to restore personal responsibility to the bankruptcy system and to ensure that it is fair for debtors, creditors and consumers.”
Currently, two C-block personal communications services companies-Pocket Communications Inc. and General Wireless Inc.-are working out their Chapter 11 protection problems while awaiting the Federal Communications Commission’s C-block financial-restructuring decision; other cash-strapped licensees may be pondering bankruptcy if the commission’s resolution of petitions for reconsideration regarding the four restructuring electives proposed last fall by the FCC is not tailored to meet their survival needs.
According to a statement circulated by Rep. Gekas, “More than 50,000 American businesses file for bankruptcy each year, including many small ones (those with $5 million or less in debt).” What the bill proposes is to “require all small businesses to confirm Chapter 11 plans within 150 days of filing or prove that they are deserving of an extension; enlarge the grounds for conversion to Chapter 7, under which a bankruptcy trustee is required to liquidate the business; and charge U.S. trustees and bankruptcy administrators with overseeing small business debtors and `blowing the whistle’ early on cases that cannot succeed in Chapter 11.” The last item, said Rep. Gekas, was designed to overhaul the current oversight system that uses court-appointed creditors’ committees, which he claimed are ineffective.
The bill lists several scenarios that would give cause to converting a small-business bankruptcy from reorganization to liquidation, including:
A substantial or continuing loss or diminution of the business,
Gross mismanagement,
Unauthorized use of cash collateral,
Failure to timely satisfy any needed report
And failure to provide information to or attend meetings called by the court or creditors.
If passed, H.R. 3150 would streamline bankruptcy filing procedures, including allowing the courts to waive disclosure statements. It also strengthens rules regarding the timely filing of monthly operating reports and financial statements. It also would establish segregated bank accounts in which debtors must deposit government funds or funds that should be paid to the government for employee and business taxes, instead of using such monies for operating cash.
