Chapter 11 Filing Without Consent of Independent Director Dismissed as Unauthorized

Summary

This article discusses a recent decision addressing the enforceability of blocking provisions, including lender requirements that a borrower include certain provisions in its organizational documents and/or the loan agreements that limit a borrower's ability to file for bankruptcy protection. Courts disagree over whether provisions in a borrower's organizational documents or loan agreements designed to restrict or prevent the borrower from filing for bankruptcy are enforceable as a matter of federal public policy or applicable non-bankruptcy law. There have been a handful of court rulings addressing this issue in recent years, with mixed outcomes.