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General Stores Corp. v. Shlensky, 350 U.S. 462 (1956)

General Stores Corp. v. Shlensky

No. 170

Argued January 18, 1956

Decided March 26, 1956

350 U.S. 462


Petitioner instituted proceedings under Chapter XI of the Bankruptcy Act, alleging inability to pay its debts as they matured. It had been converted from an operating company to a holding company with the shares of the subsidiaries pledged to creditors; and it had heavy short-term loans. It had no publicly held debts, but had over 2,000,000 shares of common stock listed on the American Stock Exchange and held by over 7,000 shareholders. A shareholder owning 3,000 shares, and the Securities and Exchange Commission, moved that the proceedings be dismissed unless the petition be amended to comply with Chapter X of the Bankruptcy Act.

Held: in deciding that proceedings under Chapter X, rather than Chapter XI, were appropriate, the discretion exercised by the District Court and the Court of Appeals did not transcend allowable bounds, and their judgment is affirmed. Pp. 350 U. S. 463-468.

(a) In determining whether Chapter X or Chapter XI affords the appropriate remedy, the question is whether, on the facts of the case, the formulation of a plan under the auspices of disinterested trustees, as assured by Chapter X and the other protective provisions of that Chapter, would better serve the public and private interests concerned, including those of the debtor, than the simpler arrangement under Chapter XI. Pp. 350 U. S. 465-466.

(b) The essential difference in the choice between Chapter X and Chapter XI is not between the small company and the large company, nor in the nature of the capital structure, but between the needs to be served. Pp. 350 U. S. 466-467.

(c) The record in this case supports the view of the two lower courts that petitioner may need a more pervasive reorganization than is possible under Chapter XI. Pp. 350 U. S. 467-468.

222 F.2d 234 affirmed.

Page 350 U. S. 463

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