A participation threshold conditions the defendant's funding obligation on a specified proportion of eligible claimants accepting. Thresholds commonly range from eighty-five to ninety-five percent.
Failure to reach the threshold typically gives the defendant a walk-away right.
Alternative Names:
Threshold Participation, Minimum Participation
Why it Matters?
Setting the threshold requires balancing the value of near-complete peace against the risk that a small group of holdouts collapses the deal. Thresholds structured as options rather than automatic terminations preserve flexibility, since a defendant reaching ninety-two percent against a ninety-five percent requirement usually prefers to proceed. Firm-level thresholds requiring each participating firm to deliver a proportion of its inventory are a further refinement.
Frequently Confused with
Related terms
Frequently asked questions
What thresholds are typical?
What is a firm-level threshold?
