FULLBEAUTY Brands Holdings – U.S. Trustee Objects to 24 Hour Petition-to-Confirmation Cycle as Violation of Due Process and Bankruptcy Norms

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February 4, 2019 – The U.S. Trustee in the FULLBEAUTY Brands Holdings case objected [Docket No. 34] to the Debtors’ Amended Joint Prepackaged Chapter 11 Plan of Reorganization [Docket No. 11] arguing that the Debtors’ proposed 24-hour bankruptcy precludes proper post-petition scrutiny of the Debtors’ Plan and violates basic principles of due process.
 
The objection states, “Without even a formal request to shorten notice of the statutorily established deadlines for confirmation in their solicitation procedures motion, the debtors are seeking to confirm a plan in less than twenty-four hours after they filed a prepackaged plan, which would enable them to race through the Chapter 11 too quickly and provide any time for parties-in-interest, governmental agencies, and the Court sufficient time to evaluate – let alone respond or object to – the Plan. While the Bankruptcy Code authorizes pre-packaged bankruptcy plans in which much of the activity precedes the filing of the Chapter 11 petition(s), it does not authorize debtors to short-circuit the bankruptcy process so as to avoid post-petition scrutiny or to violate basic principles of due process. Indeed, those parties-in-interest fortunate enough to be aware of the filing of these Chapter 11 cases were saddled with a deadline to object to the Plan and Disclosure Statement – as well as lengthy supporting documentation – two days before the Petition Date. Accordingly, the lack of adequate notice renders the Plan unconfirmable.
 
Confirmation should also be denied because the Plan incorporates provisions that violate the Section 503(C) of the Bankruptcy Code. The Management Incentive Plan and the Key Employee Incentive and Retention Plans are all authorized pursuant to the Plan, but there is no information presented allowing any determination that the various plans satisfies the requirements under Section 503(C).

Finally, the Plan should not be confirmed because it includes an exculpation provision that extends beyond fiduciaries of the estate.” 

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