October 18, 2011
Delaware Bankruptcy Capital Status May End With Proposed Law
"A bipartisan bill sponsored by leaders of the House Judiciary Committee may strip Delaware of its status as the premier venue for U.S. bankruptcy cases, costing the state’s economy an estimated $100 million a year.
Lamar Smith, the Texas Republican who chairs the Judiciary panel, introduced the bill with Michigan’s John Conyers, its ranking Democrat. The aim is to prevent court-shopping and make companies reorganize at home 'to ensure maximum input from all affected stakeholders,' Smith said in a statement. Delaware’s Congressional delegation disagreed, citing the Wilmington-based court’s expertise.
'When someone has a specific medical problem, they go to a specialist,' Representative John Carney, a Democrat, said by e- mail. 'Delaware’s courts are our nation’s bankruptcy specialists.' The state’s two U.S. senators, Democrats Thomas Carper and Chris Coons, also oppose the bill.
Under the measure, a corporation may file for Chapter 11 reorganization only in the federal district where its principal place of business or assets are located.
The Chapter 11 Bankruptcy Venue Reform Act of 2011 would thus rule out most of the 90 public companies that since 2006 have sought protection from creditors in U.S. Bankruptcy Court in Wilmington, Delaware, where they are incorporated."
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