Source: http://www.mofo.com/files/Uploads/Images/130430-Tax-Talk.pdf
"In another recent private letter ruling,16 the IRS ruled that an ownership change pursuant to a bankruptcy reorganization plan qualified for an exception to the general rule limiting net operating loss ("NOL") carryforwards under Section 382(a).
The transaction at issue concerned a reorganization of a holding company, the common parent of an affiliated group of corporations that filed a consolidated federal income tax return. As part of the reorganization, the parent holding company’s creditors became equity owners — an ownership change under Section 382 of the Code. The parent’s principal operating subsidiary, which did not declare bankruptcy, carried on a business in a regulated industry.
However, to preserve the parent corporation’s net operating losses, the bankruptcy court approved a stock and claims trading order that provided for various requirements designed to allow the parent corporation’s plan of reorganization to fall within the scope of Section 382(l) (5), the so-called “bankruptcy exception” to the NOL loss limitation rules set forth in Section 382(a).
Typical of reorganizations designed to maintain NOLs, the trading order contained the following provisions: 1) requirement that substantial equity holders provide notice of their ownership percentage to the parent company; 2) requirement that substantial equity holders notify the bankruptcy court of any transaction that would increase or decrease their ownership of the parent; 3) right of the parent company to file a reporting notice with the bankruptcy court, requiring any claimholder to report its holdings; and, 4) option by the parent company to file a request for a “sell-down” order with the bankruptcy court, authorizing the parent company to require claimholders to sell down a certain percentage of their claims (ostensibly to meet the 5% stock ownership cutoff under Section 382). "
GOOD NEWS capitalization-wise
