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July 19, 2020, 04.50 PM

WASHINGTON, – Around one-third of more than 40 large American firms seeking US bankruptcy protection showered their executives with big bonuses.

Although the coronavirus pandemic has dealt a massive blow to several American firms, some of these enterprises awarded bonuses to their executives within a month of filing their cases.

This was based on a Reuters analysis of securities filings and court records.

A 2005 bankruptcy law in the US bans companies, with few exceptions, from paying executives retention bonuses while in bankruptcy.

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The firms, however, took advantage of a loophole by granting payouts before filing bankruptcy.

Six approved bonuses a month prior to bankruptcy filings.

These American firms cited business challenges their executives faced during the coronavirus pandemic to justify the compensations.

Even more firms paid bonuses in the half-year period before their bankruptcies.

Thirty-two of the 45 companies Reuters examined approved or paid bonuses within six months of filing. Nearly half authorized payouts within two months.

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