Control Rights, Priority Rights, and the Conceptual Foundations of Corporate Reorganizations

THE modern approach to corporate reorganizations begins in a curious place. Everywhere else in corporate law, we focus on those who control the firm and on when others should be able to go to court and reverse their decisions.' With respect to corporate reorganizations, however, we ignore these questions and instead focus on priority rights.2 Our lodestar is the real estate foreclosure. A real estate foreclosure is an actual sale of a physical asset, and the proceeds of the sale are distributed to old creditors and shareholders according to nonbankruptcy priorities. A reorganization is