73d CONGRESS. SESS. II. CHS. 424, 425. JUNE 7, 1934. SEC. 8. That the first sentence of subsection (a) of section 75 of the Act of July 1, 1898, entitled "An Act to establish a uniform system of bankruptcy throughout the United States" as amended, is amended to read as follows: 925 Conciliation commis sioners, Appointment, by bankruptcy courts is 500 or more farmers. "Within thirty days after the enactment of this Act every court of bankruptcy of which the jurisdiction or territory includes a every county ag county or counties having an agricultural population (according to the last available United States census) of five hundred or more farmers shall appoint one or more referees to be known as 'conciliation commissioners', one such conciliation commissioner to be appointed for each county having an agricultural population of five hundred or more farmers according to said census: Provided further, Proviso That where any county in any such district contains a smaller num- unprovided for. ber of farmers according to said census, for the purposes of this paragraph such county shall be included with one or more adjacent counties where the population of the counties so combined includes five hundred or more farmers, according to said census." SEC. 9. That the second sentence of subdivision (b) of section 75 of the Act of July 1, 1898, entitled "An Act to establish a uniform system of bankruptcy throughout the United States ", as amended, is amended to read as follows: The conciliation commissioner shall receive as compensation for his services, including all expenses, a fee of $25 for each case docketed and submitted to him, to be paid out of the Treasury." SEC. 10. That section 76 of the Act of July 1, 1898, as amended, is amended to read as follows: "SEO. 76. Extensions made pursuant to the foregoing provisions of this chapter shall extend the obligation of any person who is secondarily liable for or who may have insured or guaranteed such debt or debts, or any part thereof, or bonds issued upon the security of same, and a copy of the order confirming such extension, certified as required by the provisions of law with reference to judgments and proceedings in courts of the United States, shall be sufficient evidence that such extension has been confirmed in any suit or proceeding brought against any such person so liable." Approved, June 7, 1934, 12 o'clock, noon. Inclusion of countles Compensation. Vol. 47, p. 1474. or liable sons secondarily Mr. VAN NUYS, from the Committee on the Judiciary, submitted the following REPORT [To accompany H.R. 58S4) The Committee on the Judiciary, having had under consideration the bill (H.R. 5884) to amend an act entitled "An act to establish a uniform system of bankruptcy throughout the United States", approved July 1, 1898, and acts amendatory thereof and supplementary thereto, reports the same favorably to the Senate and recommends that the bill do pass, with the following amendments: On page 2, line 16, following the word "stating" and before the word "that" insert the following: The requisite jurisdictional facts under this section; the nature of the business of the debtor; in brief description, the assets, liabilities, capital stock, and financial condition of the debtor; if a prior proceeding is pending, the name of the court in which it is pending, and the nature of such proceeding; facts showing the need for relief under this section; and On page 2, line 22, after the word "assets" strike out the period, insert a comma and the following words: "or in the territorial jurisdiction in which it was incorporated." On page 3, line 14, following the word "debtor", and in lieu of "on the ground of insolvency", insert the following: "by reason of its inability to pay its debts as they mature". On page 4, line 25, following the word "deny" and before the word "either", insert the following: "any material allegation of the petition", striking out the remainder of that line. 2 AMEND BANKRUPTCY ACT-CORPORATE REORGANIZATION On page 5, strike out lines 1 and 2, and that part of line 3 preceding the words "the judge". On page 6, line 22, following the word "stockholders", and before the words "a majority" insert the words "of which less than", and strike out the words "of which" preceding the word "shall" and "not" following the word "shall". 11 On page 7, line 11, following the word "creditors" insert "of which less than"; and strike out in the same line the words "of which' following the word "amount"; and "not" following the word "shall”. On page 9, line 9, following the word "purposes", strike out the word "and". On page 9, line 10, insert after the word "debtor" the following: "and may include any other appropriate provisions not inconsistent with this section". On page 10, line 23, insert after the word "person" the following ", by an attorney at law,". On page 10, line 23, immediately following the word "committee" insert the following: The running of all periods of time prescribed by any other provisions of this Act, and by all statutes of limitations, shall be suspended during the pendency of a proceeding under this section. On page 14, line 11, change the word "reimbursed" to "reimbursement". On page 14, line 16, insert after the word "going" and before the word "but", the words: "and of the debtor". On page 22, lines 8 and 9, strike out the words "the same and the orders of the judge relative thereto, shall be put into effect and carried out,". On page 22, line 11, insert in lieu of the words "shall be" a comma and the word "when". On page 22, line 14, insert in lieu of the words "shall be" the word "when". On page 22, line 16, insert following the word "plan" and before the word "free", a comma and the words "shall be". On page 22, line 20, insert following the word "conveyance" and before the word "and" the words "or retention". On page 22, line 21, following the word "debtor" and before the phrase "to make" insert the following: "and any mortgagee, the trustee of any obligation of the debtor, and all other proper and necessary parties". On page 23, line 6, after the word "aforesaid", insert the following: All securities issued pursuant to any plan of reorganization confirmed by the court in accordance with the provisions of this section, including, without limiting the generality of the foregoing, any securities issued pursuant to such plan for the purpose of raising money for working capital and other purposes of such plan and securities issued by the debtor or by the trustee or trustees pursuant to subdivision (c), clause (3), of this section, and all certificates of deposit representing securities of or claims against the debtor which it is proposed to deal with under any such plan, shall be exempt from all the provisions of the Securities Act of 1933, approved May 27, 1933, except the provisions of subdivision (2) of section 12, and section 17, thereof. AMEND BANKRUPTCY ACT-CORPORATE REORGANIZATION 3 On page 30, line 15 and line 16, strike out the words "which claims shall be liquidated under section 63 (b) of this act", and insert in licu thereof: but the claim of a landlord for anticipatory breach of an unexpired lease of real estate shall in no event be allowed in an amount exceeding the rent reserved by the lease for the year next succeeding the date of the surrender of the premises. On page 32, following section 6, insert a new section to be numbered section 7, and to read as follows: SEC. 7. Proceedings under section 77 of chapter 8, amendment to the act of July 1, 1898, entitled, "An Act to establish a uniform system of bankruptcy throughout the United States, as amended", approved March 3, 1933, shall not be grounds for the removal of any cause of action to the United States district court which was not removable before the passage and approval of this section and any cause of action removed from a State court on account of this section shall be remanded upon request of claimant. The purposes and need of this legislation are set out in House Report No. 194, Seventy-third Congress, first session, which accompanied this bill in the House of Representatives and which is adopted as part of the report of this committee, as follows: HOUSE REPORT NO. 194, SEVENTY-THIRD CONGRESS, FIRST SESSION The Committee on the Judiciary, to whom was referred the bill (H.R. 5884) to amend an act entitled "An act to establish a uniform system of bankruptcy throughout the United States," approved July 1, 1898, and acts amendatory thereof and supplementary thereto, after consideration, report the same to the House with the recommendation that the bill do pass. This bill if enacted will result in reducing the cost of reorganizing corporations entitled to its benefits in the following ways, provided, of course, a plan of reorganization is proposed and accepted by the required percentage of creditors and confirmed: (1) Ancillary receiverships are obviated. (2) Compensation of reorganization managers, counsel, etc., must be found by the judge to be reasonable and reimbursement is made for only actual and necessary expenditures, and an amendment is being proposed giving the right to appeal independently of all other appeals to the circuit court of appeals from orders fixing such compensation, such appeals to be heard summarily. This not only adds publicity in that the circuit courts of appeal will be informed, but it will tend to produce uniformity of charges throughout the particular circuit. Its (3) The bill permits the debtor corporation to be the final reorganized corporation. This was done in the Phipps case. The charter of a corporation costs money and is an asset which should if possible be preseved for the benefit of the creditors and stockholders. charter would no doubt have to be amended where the plan provided. for a composition rather than for an extension. The means specified in subdivision (b) for carrying out a plan includes as one of the means the amendment of the charter of the debtor. 4 AMEND BANKRUPTCY ACT-CORPORATE REORGANIZATION (4) In order to permit of an extension the plan may provide for an extension of maturity dates or a change in interest rates or other terms, or the curing or waiver of defaults and the modification of liens, indentures, or other instruments. In some cases it may be only necessary to have a moratorium on sinking funds or a reduction in the amount thereof. This can be accomplished under the bill. (5) Liens may be satisfied. This will avoid the costs of foreclosure where a mortgage indebtedness must be readjusted. (6) The fact that outstanding securities may be amended or modified by change of interest rates or otherwise may make it unnecessary to have new securities engraved, printed, or otherwise prepared and issued. (7) The court is authorized to continue the debtor in possession and in such case the salaries of officers must be reasonable and approved by the judge. Salaries of officers will likely be less than fees of trustees. In some cases officers will be willing to work for nothing in order to preserve the situation and their stock interest therein. Company officers will also keep down company counsel fees to a point lower than counsel fees of a trustee. (8) The bill exempts from the stamp tax the issuance of the new securities, if any are issued, and thus prevents a duplication of tax. The tax has already been paid on the outstanding securities and the new securities, if any are issued, will merely take their place. (9) The bill permits a plan of reorganization to be presented and accepted by creditors and stockholders before the institution of a proceeding under the bill. This will permit the shortening of the period of such proceedings. This was done in the National Radiator Corporation case, decided by the Circuit Court of Appeals for the Third Circuit in March 1933. In that case a plan was adopted and accepted by upward of 96 percent of the creditors before the receivership was applied for. The receivership was applied for in order to compel the minority either to accept the plan or to accept payment on the basis of an upset price which was fixed by the court. This is permitted by the bill. Section 78 of this bill is a new section, granting the courts of bankruptcy jurisdiction in proceedings under the provisions of this bill. It corresponds to section 73 of chapter VIII, added to the Bankruptcy Act by the act of March 3, 1933. Section 79 is entitled "Corporate Reorganizations" and provides for the reorganization of corporations. The scheme of the section is similar to that of section 77 of chapter VIII entitled "Reorganization of Railroads Engaged in Interstate Commerce." It provides that any corporation which could become a bankrupt under section IV of the Bankruptcy Act, and any railroad or other transportation corporation, except a railroad corporation authorized to file a petition or answer under the provisions of section 77 of the act, and except as provided in subdivision (n) of section 79, may file an original petition, or, before adjudication in an involuntary bankruptcy proceeding, an answer, or in any proceeding pending in bankruptcy, a petition, stat ing that the corporation is insolvent or is unable to meet its debts as they mature and that it desires to effect a plan of reorganization. If the court is satisfied that the petition or answer complies with section 79 and is filed in good faith, it shall be approved, otherwise dismissed. If approved, the court in which the order of approval |