Distressed Investors' Unexpected Tool: Understanding the Small Business Reorganization Act and Changes Related to the CARES Act

Robinson & Cole LLP
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In what seems like in the blink of an eye, a once robust economy quickly evaporated, leaving many small businesses with little to no revenue and depleted cash reserves. While many businesses are facing financial distress, the federal government has sought to ease some of the burdens on distressed small businesses with several initiatives bundled within the CARES Act. While much has been made of the Paycheck Protection Program (PPP), Congress also increased the debt limit under the Small Business Reorganization Act (SBRA), a new subchapter of the Bankruptcy Code’s Chapter 11 reorganization provisions. The SBRA is intended to streamline the bankruptcy reorganization process for small-business debtors by eliminating certain disclosure requirements while simultaneously tightening case deadlines to make the trip through the bankruptcy process as quick as possible. This article will summarize the SBRA and highlight opportunities distressed company investors may have given the streamlined bankruptcy process enacted by the SBRA.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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