In a reorganization under 77B the unsecured creditors were to be paid by receiving non-voting preferred stock of the insolvent debtor up to the amount of their claims. The old preferred stockholders were to keep the balance of this same class of stock. One thousand shares of voting common stock were to be given to the old shareholders on the basis of one new share for each old share. The plan was approved by ninety-four per cent of the creditors, but the master proposed an amendment whereby the creditors were to have the right to vote in the selection of the management. Upon objection to this amendment it was held that the plan was unfair, and the court stated that a decree confirming the plan would be entered conditioned upon the plan being amended so that (1) the creditors receive a voting stock preferred over that of the old shareholders, and (2) the common stock be reduced to one hundred shares. In re Tharp Ice Cream Co., Inc., (D. C. Pa. 1938) 25 F. Supp. 417.
Stanton J. Schuman,
BANKRUPTCY - CORPORATE REORGANIZATION - FAIRNESS OF THE PLAN,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol37/iss5/12