Regional Administrators: Allred, Oran H., Fort Worth Regional Office. Kennedy, W. McNeill, Chicago Regional Office. Part I NEW DUTIES OF THE COMMISSION WITH RESPECT TO CORPORATE REORGANIZATIONS UNDER CHAPTER X OF THE BANKRUPTCY ACT, AS AMENDED During the past fiscal year, the Commission inaugurated its functions under Chapter X of the Bankruptcy Act, as amended in 1938 (Public No. 696, 75th Congress), relating to the reorganization of corporations and superseding Section 77B of that Act. Chapter X affords the appropriate machinery for the reorganization of corporations (other than railroads) in the Federal courts under the Bankruptcy Act. The Commission's duties under the chapter are, first, at the request or with the approval of the court, to act as a participant in proceedings thereunder in order to provide independent, expert assistance on matters arising in such proceedings. Second, the Commission is empowered to prepare, for the benefit of the courts and investors, advisory reports on plans of reorganization submitted in such proceedings. COMMISSION FUNCTIONS UNDER CHAPTER X The functions of the Commission as a participant in Chapter X proceedings are governed by Section 208 of the Act. That section provides that the Commission shall, if requested by the judge, and may, upon its own motion if approved by the judge, file a notice of its appearance in a proceeding under Chapter X. Upon the filing of such notice, the Commission is deemed to be a party in interest and has a right to be heard upon all matters arising in the proceeding, However, it may not appeal or file any petition for appeal in the proceeding. The Commission's functions in connection with advisory reports on reorganization plans are governed primarily by Section 172 of the Act. That section provides that the judge shall, if the indebtedness of the debtor exceeds $3,000,000, and may, if the indebtedness does not exceed that amount, submit to the Commission for examination and report any plan or plans of reorganization which the judge deems worthy of consideration. Section 173 of the Act provides that the judge may not approve any plan until the Commission has filed its report or has notified the judge that it will not file a report, or unless no report has been filed within the period fixed by the judge. Section 175 provides that upon the approval of any plan by the judge, the Commission's report, if one has been filed or a summary prepared 189101-40-2 7 by the Commission, must be transmitted to creditors and stockholders who are being asked to vote on the plan, along with certain other material. In general, the Commission's functions under Chapter X are advisory in nature, and are designed to make available to the courts and security holders the expert and impartial assistance of the Commission. In order that its functions under Chapter X may be more effectively and efficiently exercised, the Commission established the Reorganization Division in Washington and reorganization units in the several regional offices. This decentralization was designed to meet the needs of the courts and the parties involved and to avoid the delay and expense that might have been occasioned by the exercise of all the functions directly from Washington. It has been accomplished, however, without the delegation by the Commission of any power of decision. PROCEEDINGS IN WHICH THE COMMISSION PARTICIPATED The amended Act did not become fully effective until September 22,1938, but the provisions of Chapter X thereof were made applicable in their entirety to proceedings in which the petition for reorganization was approved within 3 months prior to that date. It was further enacted that the provisions of Chapter X should apply, to the extent that their application was deemed practicable by the judge, to proceedings in which the petition was approved more than 3 months before September 22, 1938. Through the operations of these provisions, the Commission has therefore been active not only in cases instituted since the enactment of Chapter X, but in numerous cases which originated under the provisions of Section 77B of the Bankruptcy Act. In reaching the decision that it should seek to become a participant in any case, the Commission has borne in mind the criterion that the more important provisions now embodied in Chapter X of the Bankruptcy Act were designed to assure greater protection for the interests of the public investor. Accordingly, the Commission has concerned itself with all cases involving a definite public interest, and, generally speaking, has sought to participate in all cases involving more than $250,000 face amount of securities outstanding in the hands of the public. However, the Commission also has become a party to smaller cases in which there were special factors which indicated the desirability of its participation, such as a questionable corporate history, or the proposal of an improper plan of reorganization, or inadequate representation for the public investors, or violations of various proisions of the new Act. During the period from September 22, 1938 (the date on which the amended Bankruptcy Act became fully effective), through June 30, 1939, the Commission filed its notice of appearance in 87 proceedings involving the reorganization of 105 corporations (87 principal debtor corporations and 18 subsidiary debtors). Of these 87 proceedings, 38 were commenced under Chapter X, while 49 originated under Section 77B. In 53 proceedings the Commission filed its notice of appearance at the request of the judge; while in the remaining 34 it became a party upon approval by the judge of its own motion to participate. In only one instance was the Commission's motion to participate denied. The 105 debtors involved in the proceedings to which the Commission became a party showed aggregate assets of over $550,000,000 and aggregate indebtedness of over $440,000,000. These proceedings embraced a wide variety of industries, as indicated by the following table: Does not include 2 companies whose assets were not ascertained. Included among the various industries listed above were the following types of companies: A drug concern, traction and power companies, an investment trust, paper manufacturing concerns, a radiator concern, a toll bridge, oil companies, gold and silver mining companies, warehouses, a tanning company, a coal company, and numerous hotels, apartment houses, and other real estate concerns. In individual cases, the outstanding indebtedness of these companies varied from less than $100,000 to over $50,000,000. In 23 instances the indebt |