William O. Douglas

“ For purposes of clause (C) they must be counted in determining where 'control' over the new company lay. They cannot be treated under clause (C) as something other than 'stockholders' of the old company merely because they acquired a minority interest in the new one. Indeed clause (C) contemplates that the old corporation or its stockholders, rather than its creditors, shall be in the dominant position of 'control' immediately after the transfer and not excluded or relegated to a minority position. Plainly the normal pattern of insolvency reorganization does not fit its requirements. ”

“ But with that exception, the requirements of § 112 (g) (1) (B) are not met if properties are acquired in exchange for a consideration other than, or in addition to, voting stock. Under that test this transaction fails to qualify as a 'reorganization' under clause (B) .
In the first place, security holders of the old company owning $440,000 face amount of obligations were paid off in cash. That cash was raised during the reorganization on a loan from a bank. Since that loan was assumed by respondent, it is argued that the requirement of clause (B) , as amended in 1939, was satisfied. ”

“ A bondholders' committee was formed which obtained the deposit of about 85% of the bonds outstanding. Members of the committee became directors of the old corporation and beginning in the fall of 1932 were in control of it. In 1934 equity receivers were appointed by the Delaware chancery court. A plan of reorganization was formulated which was approved by the court. The plan called for the formation of a new company which would acquire the assets of the old in exchange for voting common stock and Class A and Class B stock purchase warrants. ”