Some New York readers may be familiar with the legal term “jurisdiction.” Jurisdiction has to do with where a legal matter can filed and what court may hear the related matter. Most parties who wish to engage in legal matters must have some connection to the jurisdictions in which they choose to file their bankruptcy or litigation paperwork.
Recently a Chilean bus company chose to file for bankruptcy in New York. The country operates its buses in Santiago and runs its business abroad. One may wonder then how this company was able to bring its business bankruptcy matter into the United States.
Many large companies that fall into debt are not single entities. Rather, those large corporate structures are made up of many subsidiaries, groups and other smaller units that are jurisdictionally attached to different places. Companies with such structures can often choose to file for bankruptcy in centrally located or major financial jurisdictions, and New York is often a good fit.
American bankruptcy law also protects a debtor-company’s property by channeling it into a bankruptcy estate. The business bankruptcy law uses broad language that lets the bankruptcy estate encapsulate property across diverse locations; therefore, by using American bankruptcy law a company can pull all of its assets and wealth together under the protections of a single legal process.
A business or commercial bankruptcy can terminate a corporation’s existence or can allow it to regroup and emerge as a stronger entity. Many foreign companies choose to utilize American bankruptcy laws due to the broad reach those laws offer. American companies can benefit from those laws, too, and New York businesses considering bankruptcy can learn more about the legal process by working with local bankruptcy attorneys.
Source: The New York Times, “Corporate Bankruptcy Tourists Land in U.S.,” Stephen J. Lubben, Oct. 31, 2014