May 14, 2020

Bankruptcy Remote Entities

Bankruptcy Remote Entities

Bankruptcy Remote Finance Subsidiaries: The Substantive Consolidation Issue
      Patrick C. Sargent, 44(4): 1223–41 (Aug. 1989)
Limited purpose finance subsidiaries are frequently used to raise capital because they can be structured to reduce the risk of substantive consolidation with a parent or affiliate that becomes financially troubled. Reduction of this risk facilitates a higher credit rating and reduces the cost of funds. This Article analyzes judicial decisions addressing substantive consolidation and identifies factors that typically merit that result.

Structured Financing Techniques
      committee on Bankruptcy and Corporate Reorganization of the Association of the Bar of the City of New York , 50(2): 527–606 (Feb. 1995)
Although relatively new, the use of structured financing techniques has grown rapidly and now accounts for $450 billion per year of financings in the United States alone. There is nearly $2 trillion of mortgage and asset-backed financings outstanding in the United States. The possibilities seem limitless. This Report explores structured financings—their history, structural elements, and underlying legal basis.

Framework for Control over Electronic Chattel PaperÂ-Compliance with UCC § 9–105
      Working Group on Transferability of Electronic Financial Assets, a Joint Working Group of the committee on Cyberspace Law and the committee on the Uniform Commercial Code of the ABA Section of Business Law and The Open Group Security Forum, 61(2):721—744 (February 2006)

Working Paper: Best Practices for Debtors' Attorneys
      Task Force on Attorney Discipline Best Practices Working Group, Ad Hoc committee on Bankruptcy Court Structure and the Insolvency Processes, ABA Section of Business Law, 64(1): 79-152 (November 2008)

Special Report on the Preparation of Substantive Consolidation Opinions
The committee on Structured Finance and the committee on Bankruptcy and Corporate Reorganization of The Association of the Bar of the City of New York, 64(2): 411-432 (February 2009)

Trademark Licensing in the Shadow of Bankruptcy
     James M. Wilton and Andrew G. Devore, 68(3): 739-780 (July 2013)
When a business licenses a trademark, transactional lawyers regularly advise that if the trademark licensor files for bankruptcy, the licensee could be left without a right to use the mark and with only a bankruptcy claim for money damages against the licensor. Indeed, the ability of a trademark licensor to reject a trademark license and to limit a licensee’s remedies to a dischargeable claim for money damages has been a significant risk for licensees for twenty-five years based on the Fourth Circuit case, Lubrizol Enterprises, Inc. v. Richmond Metal Finishers, Inc. This result is grounded in the Bankruptcy Code prohibition on remedies of specific performance for non-debtor parties to rejected contracts and is in accord with Bankruptcy Code policy of affording debtors an opportunity to reorganize free of burdensome contracts. In the summer of 2012, however, the Seventh Circuit, in its decision Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, held that a non-debtor trademark licensee retains rights to use licensed trademarks following rejection of the contract by the debtor-licensor. The decision, derived from a pre-Bankruptcy Code paradigm for understanding the rights of non-debtors under rejected executory contracts that convey interests in property, creates a circuit split over the implications of trademark license rejection. This article asserts that the Sunbeam Products case misconstrues the rights of a trademark licensee as a vested property right and is therefore incorrect under both the holding of the Lubrizol case and the pre-Bankruptcy Code paradigm on which the Sunbeam Products case relies.