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Simple English definitions for legal terms
protective committee
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A quick definition of protective committee:
A protective committee is a group of people who own a special type of stock in a company. They work together to make sure that their interests are protected if the company has to sell all its assets or change the way it operates. This helps to make sure that the stockholders get treated fairly and get the best outcome possible.
A more thorough explanation:
A protective committee is a group of security holders or preferred stockholders who are appointed to safeguard the interests of their group when a corporation is liquidated or reorganized. The committee is responsible for ensuring that the rights of its members are protected during the process.
For example, if a company is going bankrupt, the protective committee may be formed to represent the interests of the bondholders. The committee will work to ensure that the bondholders receive a fair share of the company's assets during the liquidation process.
Another example is when a company is undergoing a major restructuring. The protective committee may be formed to represent the interests of the preferred stockholders. The committee will work to ensure that the preferred stockholders receive fair treatment during the restructuring process.
In summary, a protective committee is a group of investors who work together to protect their interests during a corporate liquidation or restructuring. They are appointed to ensure that their group receives fair treatment and a fair share of the company's assets.