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In re 301 W North Avenue, LLC, No. 24-B-2741, 2025 WL 37897, __ B.R. __ (Bankr. N.D. Ill. Jan. 6, 2025), the U.S. Bankruptcy Court for the Northern District of Illinois (Judge David D. Cleary) granted a secured lender's motion to dismiss a Chapter 11 case for cause based on lack of corporate authorization to commence the bankruptcy proceeding.
The debtor's limited liability company agreement included provisions, added at the behest of the secured lender, that precluded the debtor from filing for bankruptcy without its independent manager's consent, but the independent manager had not consented to the filing. The court ultimately enforced the consent provision because the independent manager had fiduciary duties to the debtor itself and was required to consider the interests of the debtor's members and the debtor's constituents in matters on which the independent manager voted.
In this Reuters article, Loeb Restructuring & Bankruptcy partner Bethany Simmons and associate Noah Weingarten discuss this recent decision, emphasizing that while some restrictions on a debtor’s ability to file for bankruptcy are void against public policy, carefully drafted provisions will be enforced—serving as a critical reminder for both secured lenders and potential debtors.
The debtor's limited liability company agreement included provisions, added at the behest of the secured lender, that precluded the debtor from filing for bankruptcy without its independent manager's consent, but the independent manager had not consented to the filing. The court ultimately enforced the consent provision because the independent manager had fiduciary duties to the debtor itself and was required to consider the interests of the debtor's members and the debtor's constituents in matters on which the independent manager voted.
In this Reuters article, Loeb Restructuring & Bankruptcy partner Bethany Simmons and associate Noah Weingarten discuss this recent decision, emphasizing that while some restrictions on a debtor’s ability to file for bankruptcy are void against public policy, carefully drafted provisions will be enforced—serving as a critical reminder for both secured lenders and potential debtors.
