TRANSACTIONAL
May 2, 2017
Bankruptcy and Financial Restructuring Alert
Coming to America?—Applying Bankruptcy Code Section 109(a) to Vet
Foreign Companies Filing US Bankruptcy Cases Under Chapter 15
By Andrew N. Goldman, Benjamin W. Loveland and Lauren R. Lifland
I. Introduction
Chapter 15 of the US Bankruptcy Code provides a doorway for non-US companies to obtain
creditor protection and other benefits of a US bankruptcy in support of insolvency proceedings
for those companies in their “home” jurisdictions. But how wide open is that doorway? Recent
decisions interpreting section 109(a) of the US Bankruptcy Code in the chapter 15 context
provide answers—but not necessarily consistent ones—to this question.
Under chapter 15, a representative of a non-US debtor company may obtain recognition in the
United States for an insolvency proceeding pending for the company outside the United States.
Recognition of a foreign insolvency proceeding allows a foreign debtor company to take
advantage of significant benefits available under the US Bankruptcy Code, such as the
application of the automatic stay within US borders, even though the company’s primary
insolvency proceeding is pending in a different country.1
Over the past few years, there has been an increase in chapter 15 petitions for recognition due
in part to financial globalization, which refers to the integration of domestic financial systems
with international financial systems.2 As a result of the globalization of national and regional
economies, businesses are now more likely to take advantage of foreign capital markets where
the domestic market is unable to meet their capital needs. Such businesses are also more
inclined to hold assets abroad.3 When these businesses fail, what ultimately results is a single
debtor company spread across multiple countries—with assets and creditors in different
countries than the company’s organizational jurisdiction or headquarters.4 This unique cross-
border scenario is precisely the type of insolvency that chapter 15 of the US Bankruptcy Code
1 See In re Creative Fin. Ltd., 543 B.R. 498, 503 (Bankr. S.D.N.Y. 2016) (stating if recognition order was granted, foreign debtor
would reap the “benefits of the US automatic stay, a nd preclude execution …on [its] assets … in the United Sta tes.”); In re
Chiang, 437 B.R. 397, 402 (Bankr. C. D. Cal. 2010) (“The recognition of a foreign proceeding as a main proceeding brings certain
statutory benefits to the debtor. Section 1520(a) specifi es that, upon recognition: (a) the automatic stay pro visions of §§ 361
and 362 apply with respect to a debto r's US property within the territorial jurisdiction of the United States; (b) §§ 363, 549 and
552 apply to a transfer of interest of the debtor in US property; (c) the foreign representative ma y operate the debtor's
business in the United States and may exerc ise the powers of a trustee pursuant to §§ 363 (use, sale or lease of proper ty) and
552 (postpetition effect of security inter ests); and (d) § 5[4]2 applies to US property of the debtor.”).
2 Paul J. Keenan, Chapter 15: A NEW CHAPTER TO MEET THE GROWING NEED TO REGULATE CROSS-BORDER INSOLVENCIES, 15 J. Bankr. L. & Prac.
2 Art. 4 (April 2006).
3 Id.
4 Id.
