Companies Can Be ‘Bankruptcy Remote,’ if Properly Done

January 24, 2025

Companies Can Be ‘Bankruptcy Remote,’ if Properly Done

Bankruptcy Judge David Cleary wrote a manual on how a company can be ‘bankruptcy remote’ without violating public policy.

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Opinion Link

View Opinion

https://abi-opinions.s3.us-east-1.amazonaws.com/301+W+North+Ave.pdf

Case Details

Case Citation

In re 301 W. North Ave. LLC, 24-2741 (Bankr. N.D. Ill. Jan. 6, 2025)

Case Name

In re 301 W. North Ave. LLC

Case Type

Business

Court

7th Circuit

Illinois

Illinois Northern District

Bankruptcy Tags

Corporate Governance

Mortgage

Business Reorganization

Finance and Banking

Comments

Submitted by Thomas Salerno on January 24, 2025

Fascinating "golden share" decision! So if this financially distressed debtor convenes a directors meeting, lays out why a filing is necessary in furtherance of fiduciary duty by the directors, and the lender approved director says "no", what happens then? Lawsuit against the independent director? So the failure to file results in loss of an asset/assets thru foreclosure to the lender that approved the independent director where there is arguably value beyond the debt. I suspect (but don't know) that this lender approved director has indemnification from the lender…. (and if so, one has to wonder whether this lender starts looking more like a control person insider). What about an involuntary bankruptcy, such as you would do for a general partnership where not all general partners consent to the filing? Tom

Submitted by Giuseppe Ippolito on January 24, 2025

Third paragraph: "The agreement provided that the board could not make major decisions like filing bankruptcy without the unanimous consent of the directors, including the independent director." Last line: "Note: The debtor is appealing the dismissal." Did the board consent to the appeal of the decision that there was a lack of consent? :)