Legal Question in Business Law in Pennsylvania

Corporation and bankruptcy

A fortune 500 CFO admits to having deliberately treated $4 billion in operating expenses as assets, thereby allowing the corporation to show profits instead of losses, The auditor never detected this. The corps stock dropped 95% and bond covenants related to billions in debt are breached. At its peak price last year, the CFO sold stock acquired through stock options for $15 million, generating a $10 million gain.

Why might the corporation have to file for bankruptcy protection


Asked on 10/04/10, 5:28 pm

1 Answer from Attorneys
Cary Hall Law Offices of Cary B. Hall, L.L.C.

People -- and corporations -- sometimes file for bankruptcy to get out of otherwise binding contracts, even if otherwise they are fiscally solvent and financially sound. It's a business move, and somebody decides that the decision to endure the potential bankruptcy stigma is better than staying stuck in that particular contract.

Another reason to seek bankruptcy protection could be to head off current litigation or discharge otherwise valid judgments and liens. Again, these are tactical business decisions made as being more preferable to paying such present and/or future obligations.

Hope this helps.

Cary B. Hall, Esquire

Law Offices of Cary B. Hall, L.L.C.

121 East Chestnut Street, Suite 205

Souderton, PA 18964

T: (267) 663-9995

F: (215) 525-4364

[email protected]

http://www.carybhall.com

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Answered on 10/11/10, 10:55 am


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