Distress & Turnarounds

Chapter 15 and Cross-border Insolvency

How a foreign restructuring reaches into the United States: what recognition gives you automatically, what you have to ask for, and the two threshold questions that decide most cases before the merits.

  • Expert
  • 11 min total
  • 13 chapters

What decision this helps you make: Whether to seek recognition of a foreign proceeding in the United States, where the debtor's centre of main interests lies, and whether a US court will enforce the foreign plan's terms against US creditors and US assets.

What this topic is

Chapter 15 is the United States' enactment of the UNCITRAL Model Law on Cross-Border Insolvency. A foreign representative petitions a US bankruptcy court to recognise a foreign insolvency or restructuring proceeding. Recognition as a foreign main proceeding brings automatic relief, most importantly the automatic stay as to the debtor and its US property, and opens the door to discretionary relief including enforcement of the foreign plan. It is a gateway and an assistance statute, not a substitute plenary case.

Why it matters

Almost every large restructuring now has US touchpoints: dollar-denominated debt, New York-law governing clauses, US bank accounts, US-based creditors who can sue and attach. A foreign process that cannot bind those creditors or protect those assets is not a restructuring; it is a proposal. Chapter 15 is how the foreign process becomes effective in the largest financial market in the world, and the threshold questions of eligibility and centre of main interests decide whether it works at all.

Who should learn it

Restructuring lawyers and advisers working on cross-border cases, creditors holding claims against foreign debtors, funds investing in foreign distressed debt, and treasury and legal teams at multinational groups planning a restructuring venue.

What you will understand

  • The recognition test, the difference between main and nonmain proceedings, and what each unlocks
  • How centre of main interests is determined, when it is measured, and how far it can legitimately be moved
  • What chapter 15 does not give you, including most avoidance powers
  • How foreign plans, schemes, and releases are enforced, and where the law is currently unsettled

Prerequisites

Common misconception

"Chapter 15 is a lightweight US bankruptcy for foreign companies." It is not a bankruptcy case at all in the ordinary sense. There is no US estate, no plan of reorganisation, no distribution to creditors, and no discharge granted by the US court. The foreign court runs the restructuring; the US court decides whether and how to assist. That distinction has practical consequences that catch people out. The most notable: a foreign representative cannot use the US avoidance powers in a chapter 15 case, because §1521(a)(7) expressly withholds them.