One issue that keeps coming up again and again in conversations with people in the industry about the Quiksilver bankruptcy:
How can Quiksilver exclude its foreign subsidiaries from the Chapter 11 process?
While it seems illogical, the truth is, it is actually very common in corporate Chapter 11 filings, according to our research.
Here are several companies that filed for Chapter 11 in the U.S. and excluded their foreign subsidiaries: GM, Chrysler, Polaroid and Kodak, to name just a few.
We asked Professor Robert K. Rasmussen, the J. Thomas McCarthy Trustee Chair in Law and Political Science at the USC Gould School of Law, to explain the rules on this issue.
“Indeed it is common for foreign subsidiaries not to file,” Rasmussen said. “Technically, each subsidiary is a legally distinct entity. Those in control of the subsidiaries can decide which ones file and which ones do not.
“Even with domestic enterprises, not all of the related companies will file for bankruptcy,” he said. “In the case of foreign subsidiaries, the company may choose not to have them file because they don’t want to navigate the interaction between U.S. bankruptcy law and the various laws of the jurisdiction in which the subsidiary is located.
“It is often administratively easier to keep the foreign subsidiaries out. The subsidiaries just keep on operating as they did before the parent filed for protection,” he said.
Do you have other questions about Quiksilver’s Chapter 11 bankruptcy process? Email us, and we will try to get answers.
