The main issue is whether a reorganization plan that gives stock to former equity holders does so primarily because of their old interests in the debtor or for legitimate business reasons.  There must be causation between “holding the prior claim or interest and receiving or retaining property.”  Causation may be lacking (and the plan therefore disqualified) whenever junior classes acquire or retain an interest at a price that fails to provide the greatest possible addition to the bankruptcy estate; “and it would always come at a price too low when the equity holders obtained or preserved an ownership interest for less than someone else would have paid.” 

The requirements are that the contribution must be: 1] new; 2] substantial; 3] money or money's worth; 4] necessary for successful reorganization; 5] reasonably equivalent to the value or interest received; and 5] tested in the marketplace

1] "New Contribution":  What is offered must be new capital or some other new contribution. Loaning money to the debtor secured by the debtor's assets does not constitute a “present contribution of new value.” 

2]  The new value contributed must be “substantial” in comparison to:

—the dividend being paid on unsecured claims by virtue of the contribution.

3]  The new value contributed must:

—be a present contribution, occurring on the effective date of the plan.

That is, no future contributions or services, no personal guarantees or release of debts would suffice.

4]  "Necessary for a successful reorganization":  Under this requirement, the plan proponent must show that the reorganization effort may fail without the new value contribution. The Ninth Circuit has stated that the old owners may demonstrate the “necessity” for their new value contribution simply by showing that they are “the most feasible source of the new capital.”  But the Supreme Court has found that "[t]he old owners must do more than demonstrate that the new capital is necessary for a successful reorganization. The old owners must also show that the reorganized entity needs funds from the prior owner-managers because no other source of capital is available.” 

5] The “new value” contributed must be reasonably equivalent to the value of the interest received or retained. The equivalency requirement ensures that equity holders will not eviscerate the absolute priority rule by means of gratuitous, token cash infusions proposed primarily to ‘buy’ cheap financing.” This ordinarily requires the value of the debtor's business to be determined on a “going concern” basis.  A debtor's “going concern” value is generally determined by estimating the debtor's future earnings and discounting those earnings to present value using an appropriate discount rate.