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What are Chapter 11 Bankruptcy proceedings in the USA?

3rd April 2018


With the Weinstein Company and Claire’s Accessories in the U.S seeking Chapter 11 Bankruptcy protection in the US, I wanted to look at what that actually means.

Bankruptcy in the US doesn’t mean the same as here in the UK, where Bankruptcy is used for individuals.

Chapter 11 Bankruptcy protection in the USA, is more like the UK corporate insolvency regimes, and most like administration under Schedule B1 of the Insolvency Act 1986. Its main purpose is to allow the debtor Company to try to work out a reorganisation plan, under the supervision of the US Trustee and the Court.

Under Chapter 11 Bankruptcy Proceedings, as in the UK’s administration proceedings, the restructuring plans aren’t always achieved, and the business may end up being sold in whole or in part.

The US press reports on The Weinstein Company seem to suggest that better offers for the business as a whole are being sought, an earlier rescue bid having fallen apart. The information around the plan for Claire’s Accessories in the US, seems to suggest that they are trying to restructure the business in a similar fashion to Toys R Us (in the US), with store closures and cost-cutting.

So far, there is no news about the UK business.  Given warnings from Carpetright and Claire’s Accessories in the UK in recent days, it looks as if there are more challenging times ahead for the UK High Street.

What is also becoming clearer is that whilst consumer tastes are changing, those business heavily burdened by debt (or reputational issues, in the case of Weinstein), are less able to be flexible and adaptable in a changing consumer climate.

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