Are Voting Rights Provisions In Subordination Agreements Enforceable?

Subordination agreements often contain an agreement by the subordinated creditor that, if the issuer is a debtor in a bankruptcy case, the senior creditor can vote the claim of the junior creditor on any proposed Chapter 11 plan. If given effect, such a voting provision can give a senior creditor significant power, relative to both the subordinated creditor and other creditors, to support or oppose confirmation of a plan.

8 minute read October 01, 2022 at 12:03 AM
By
James H. Millar
Are Voting Rights Provisions In Subordination Agreements Enforceable?

Subordination agreements among creditors have an obvious purpose — to consensually reorder payment priorities among two or more creditors.

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