LLC BANKRUPTCIES

By , February 20, 2018 4:23 pm

Below are the title and first paragraph of a new law journal article about operating agreement restrictions on LLC bankruptcy filings.

36-DEC Am. Bankr. Inst. J. 26
American Bankruptcy Institute Journal
December, 2017
Feature
Cecily A. Dumas
Pillsbury Winthrop Shaw Pittman LLP
San Francisco
David S. Forsh
Pillsbury Winthrop Shaw Pittman LLP
New York
Copyright © 2017 by American Bankruptcy Institute; Cecily A. Dumas, David S. Forsh

CONSIDERATIONS IN EVALUATING LLC OPERATING AGREEMENT CONSTRAINTS ON VOLUNTARY FILINGS

Corporate entities may voluntarily commence bankruptcy only with valid authorization as determined by applicable state law. Bankruptcy-remote entities (special-purpose entities (SPEs) or special-purpose vehicles) are specifically structured to isolate credit risk to the SPE assets and minimize bankruptcy risk. The limited liability company (LLC) is a form of organization that is often used to deter bankruptcy filings through provisions in the operating agreement such as the requirement for unanimous votes. While recent decisions have invalidated certain such constraints on federal public policy grounds when implemented at a creditor’s request, future decisions could view the various policy considerations differently and reach other conclusions, particularly with other transaction structures.

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