The most important part of what we do is listen.
Shoe Sensation had a plan for expansion.
We just needed to ask the right questions,
listen, and learn. Once we understood their
plan, and how their business works, putting
together a smart plan for financing their
growth was a cinch. By really digging into
the details of their business, we were able
to be more flexible around reporting, control
reviews, and process improvement. In the end,
it was a win-win-win. It was a win for us, a
win for Shoe Sensation, and a win for the
communities in which they operate.
MANAGING DIRECTOR, HEAD OF PORTFOLIO MGMT
MEMBER FDIC | 877.343.9009
through analyses of several factors,
including the location of the debtor’s
headquarters, managers, primary assets,
and affected creditors, as well as the
jurisdiction whose law would apply
to most disputes. A foreign nonmain
proceeding is one taking place in a
country in which the debtor has an
“establishment,” defined as “any place
of operations where the debtor carries
out a nontransitory economic activity.”
Upon recognition of a foreign main
proceeding, certain relief is imposed
by operation of law—the automatic
stay takes effect, certain sections of the
Bankruptcy Code are made applicable,
and the foreign representative is entitled
to operate the debtor’s business. In
contrast, no relief is automatically
imposed upon recognition of a foreign
nonmain proceeding. Rather, the
Bankruptcy Court must authorize
appropriate relief upon request
of the foreign representative.
Regardless of whether a foreign
proceeding is recognized as main or
nonmain, however, one important
power is not conferred on the foreign
representative—the avoidance power
generally available to a Chapter 11 debtor
or trustee. A foreign representative
does not have standing to avoid certain
transfers under U.S. law, although it
may have such power under foreign
law under certain circumstances.
Chapter 15 operates based on the
principle of comity, which is reciprocal
respect between courts in different
jurisdictions for the decisions of
the other. One exception, which is
invoked on rare occasions, occurs
when the court believes that the
application of comity in a Chapter 15
case would be “manifestly contrary to
the public policy of the United States.”
This could include violation of U.S.
laws or the rights of U.S. citizens.
Offensive, Defensive Options
Chapter 15 offers debtors in cross border
cases both offensive and defensive
options. Companies can use the law
defensively to protect against certain
adverse actions against the debtor and
its assets. For example, Chapter 15 can
be used to stay litigation in the U.S.
against the debtor. It is important to
note, however, that the automatic stay
imposed in a Chapter 15 proceeding
does not have extraterritorial reach
and only applies to assets in the U.S.
Other examples of the defensive
use of Chapter 15 include using it to
stay execution on the debtor’s assets
located in the U.S. or to protect the
assets from creditors’ attacks.
Chapter 15 may also be used offensively.
For example, a debtor that has obtained
a foreign court’s approval of a plan of
reorganization may use Chapter 15 to
bind U.S. creditors to the plan’s terms
in certain circumstances. Chapter 15
may also be used to implement the
sale of a debtor’s assets located in the
U.S. and abroad if the court is satisfied
that the standard for the sale of assets
under the business judgment rule has
been met. Due to jurisdictional and
other limitations, it may be difficult
for a debtor in the U.S. to use the cash
collateral of a foreign secured lender.
Through a Chapter 15 proceeding,
however, its use may be authorized.
Chapter 15 may also prove to be an
effective mechanism when dealing with
other parties in interest. For example, a
foreign representative may use Chapter
15 to conduct broad discovery in the
U.S. Chapter 15 may also be used to
offset claims or to implement claims
resolution procedures for U.S. creditors.
The foreign representative may also