Should the words "fair and equitable" in section II (e) of the Holding Company Act be construed differently than the same words in section 77 B of the Bankruptcy Act? The Securities and Exchange Commission faced this question in disposing of a proposed plan of merger involving Utility Operators Company and subsidiaries. A divided commission gave an affirmative answer to the above question, holding "fair and equitable" in the Holding Company Act to permit relative priority. This holding merits particular interest since the United States Supreme Court has held the same words as used in section 77B permitted only absolute priority. The doctrine of absolute priority in effect comes down to this: no junior class of security holders may participate in the reorganized corporation unless all senior security holders are fully compensated. That rule, firmly fixed in proceedings both in equity reorganization and under the Bankruptcy Act, was rejected by the Securities and Exchange Commission, Commissioner Healy dissenting, in the application of the Holding Company Act to the situation presented in the case of Utility Operators Company and subsidiaries.
Michigan Law Review,
HOLDING COMPANY ACT - "FAIR AND EQUITABLE" PLAN,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol40/iss1/7