(a) At any time after the commencement of the case but before 
confirmation of a plan, on request of a party in interest or the United 
States trustee, and after notice and a hearing, the court shall order 
the appointment of a trustee--
        (1) for cause, including fraud, dishonesty, incompetence, or 
    gross mismanagement of the affairs of the debtor by current 
    management, either before or after the commencement of the case, or 
    similar cause, but not including the number of holders of securities 
    of the debtor or the amount of assets or liabilities of the debtor; 
    or
        (2) if such appointment is in the interests of creditors, any 
    equity security holders, and other interests of the estate, without 
    regard to the number of holders of securities of the debtor or the 
    amount of assets or liabilities of the debtor.

    (b) Except as provided in section 1163 of this title, on the request 
of a party in interest made not later than 30 days after the court 
orders the appointment of a trustee under subsection (a), the United 
States trustee shall convene a meeting of creditors for the purpose of 
electing one disinterested person to serve as trustee in the case. The 
election of a trustee shall be conducted in the manner provided in 
subsections (a), (b), and (c) of section 702 of this title.
    (c) If the court does not order the appointment of a trustee under 
this section, then at any time before the confirmation of a plan, on 
request of a party in interest or the United States trustee, and after 
notice and a hearing, the court shall order the appointment of an 
examiner to conduct such an investigation of the debtor as is 
appropriate, including an investigation of any allegations of fraud, 
dishonesty, incompetence, misconduct, mismanagement, or irregularity in 
the management of the affairs of the debtor of or by current or former 
management of the debtor, if--
        (1) such appointment is in the interests of creditors, any 
    equity security holders, and other interests of the estate; or
        (2) the debtor's fixed, liquidated, unsecured debts, other than 
    debts for goods, services, or taxes, or owing to an insider, exceed 
    $5,000,000.

    (d) If the court orders the appointment of a trustee or an examiner, 
if a trustee or an examiner dies or resigns during the case or is 
removed under section 324 of this title, or if a trustee fails to 
qualify under section 322 of this title, then the United States trustee, 
after consultation with parties in interest, shall appoint, subject to 
the court's approval, one disinterested person other than the United 
States trustee to serve as trustee or examiner, as the case may be, in 
the case.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2627; Pub. L. 99-554, title II, 
Sec. 222, Oct. 27, 1986, 100 Stat. 3102; Pub. L. 103-394, title II, 
Sec. 211(a), title V, Sec. 501(d)(30), Oct. 22, 1994, 108 Stat. 4125, 
4146.)


                      Historical and Revision Notes

                         legislative statements

    Section 1104 of the House amendment represents a compromise between 
the House bill and the Senate amendment concerning the appointment of a 
trustee or examiner. The method of appointment rather than election, is 
derived from the House bill; the two alternative standards of 
appointment are derived with modifications from the Senate amendment, 
instead of the standard stated in the House bill. For example, if the 
current management of the debtor gambled away rental income before the 
filing of the petition, a trustee should be appointed after the 
petition, whether or not postpetition mismanagement can be shown. 
However, under no circumstances will cause include the number of 
security holders of the debtor or the amount of assets or liabilities of 
the debtor. The standard also applies to the appointment of an examiner 
in those circumstances in which mandatory appointment, as previously 
detailed, is not required.


                        senate report no. 95-989

    Subsection (a) provides for the mandatory appointment of a 
disinterested trustee in the case of a public company, as defined in 
section 1101(3), within 10 days of the order for relief, or of a 
successor, in the event of a vacancy, as soon as practicable.
    Section 156 of chapter X ([former] 11 U.S.C. 516 [556]) requires the 
appointment of a disinterested trustee if the debtor's liabilities are 
$250,000 or over. Section 1104(a) marks a substantial change. The 
appointment of a trustee is mandatory only for a public company, which 
under section 1101(3), has $5 million in liabilities, excluding tax and 
trade obligations, and 1,000 security holders. In view of past 
experience, cases involving public companies will under normal 
circumstances probably be relatively few in number but of vast 
importance in terms of public investor interest.
    In case of a nonpublic company, the appointment or election of a 
trustee is discretionary if the interests of the estate and its security 
holders would be served thereby. A test based on probable costs and 
benefits of a trusteeship is not practical. The appointment may be made 
at any time prior to confirmation of the plan.
    In case of a nonpublic company, if no trustee is appointed, the 
court may under subsection (c) appoint an examiner, if the appointment 
would serve the interests of the estate and security holders. The 
purpose of his appointment is specified in section 1106(b).


                         house report no. 95-595

    Subsection (a) of this section governs the appointment of trustees 
in reorganization cases. The court is permitted to order the appointment 
of one trustee at any time after the commencement of the case if a party 
in interest so requests. The court may order appointment only if the 
protection afforded by a trustee is needed and the costs and expenses of 
a trustee would not be disproportionately higher than the value of the 
protection afforded.
    The protection afforded by a trustee would be needed, for example, 
in cases where the current management of the debtor has been fraudulent 
or dishonest, or has grossly mismanaged the company, or where the 
debtor's management has abandoned the business. A trustee would not 
necessarily be needed to investigate misconduct of former management of 
the debtor, because an examiner appointed under this section might well 
be able to serve that function adequately without displacing the current 
management. Generally, a trustee would not be needed in any case where 
the protection afforded by a trustee could equally be afforded by an 
examiner. Though the device of examiner appears in current chapter X 
[chapter 10 of former title 11], it is rarely used because of the nearly 
absolute presumption in favor of the appointment of a trustee. Its use 
here will give the courts, debtors, creditors, and equity security 
holders greater flexibility in handling the affairs of an insolvent 
debtor, permitting the court to tailor the remedy to the case.
    The second test, relating to the costs and expenses of a trustee, is 
not intended to be a strict cost/benefit analysis. It is included to 
require the court to have due regard for any additional costs or 
expenses that the appointment of a trustee would impose on the estate.
    Subsection (b) permits the court, at any time after the commencement 
of the case and on request of a party in interest, to order the 
appointment of an examiner, if the court has not ordered the appointment 
of a trustee. The examiner would be appointed to conduct such an 
investigation of the debtor as is appropriate under the particular 
circumstances of the case, including an investigation of any allegations 
of fraud, dishonesty, or gross mismanagement of the debtor of or by 
current or former management of the debtor. The standards for the 
appointment of an examiner are the same as those for the appointment of 
a trustee: the protection must be needed, and the costs and expenses 
must not be disproportionately high.
    By virtue of proposed 11 U.S.C. 1109, an indenture trustee and the 
Securities and Exchange Commission will be parties in interest for the 
purpose of requesting the appointment of a trustee or examiner.
    Subsection (c) directs that the United States trustee actually 
select and appoint the trustee or examiner ordered appointed under this 
section. The United States trustee is required to consult with various 
parties in interest before selecting and appointing a trustee. He is not 
bound to select one of the members of the panel of private trustees 
established under proposed 28 U.S.C. 586(a)(1) which exists only for the 
purpose of providing trustees for chapter 7 cases. Neither is he 
precluded from selecting a panel member if the member is qualified to 
serve as chapter 11 trustee. Appointment by the United States trustee 
will remove the court from the often criticized practice of appointing 
an officer that will appear in litigation before the court against an 
adverse party.


                               Amendments

    1994--Subsec. (b). Pub. L. 103-394, Sec. 211(a)(2), added subsec. 
(b). Former subsec. (b) redesignated (c).
    Subsec. (c). Pub. L. 103-394, Sec. 211(a)(1), redesignated subsec. 
(b) as (c). Former subsec. (c) redesignated (d).
    Subsec. (d). Pub. L. 103-394, Secs. 211(a)(1), 501(d)(30), 
redesignated subsec. (c) as (d) and inserted comma after ``interest''.
    1986--Subsecs. (a), (b). Pub. L. 99-554, Sec. 222(1), (2), inserted 
``or the United States trustee'' after ``party in interest''.
    Subsec. (c). Pub. L. 99-554, Sec. 222(3), substituted ``the United 
States trustee, after consultation with parties in interest shall 
appoint, subject to the court's approval, one disinterested person other 
than the United States trustee to serve'' for ``the court shall appoint 
one disinterested person to serve''.


                    Effective Date of 1994 Amendment

    Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not 
applicable with respect to cases commenced under this title before Oct. 
22, 1994, see section 702 of Pub. L. 103-394, set out as a note under 
section 101 of this title.


                    Effective Date of 1986 Amendment

    Effective date and applicability of amendment by Pub. L. 99-554 
dependent upon the judicial district involved, see section 302(d), (e) 
of Pub. L. 99-554, set out as a note under section 581 of Title 28, 
Judiciary and Judicial Procedure.

                  Section Referred to in Other Sections

    This section is referred to in sections 322, 546, 557, 1103, 1106, 
1161 of this title.