The last few months have taught us a few things about financing and selling companies. Below are some current developments.

Single purpose entities
Many lenders attempt to prevent business borrowers from seeking bankruptcy relief, thus protecting their contractual collection provisions. The use of single purpose entities to achieve this result is standard for certain loans, including syndications.

As a matter of public policy, federal law does not permit a borrower’s waiver of the right to seek bankruptcy. However, it does require proper internal debtor procedures to authorize bankruptcy. The history of SPEs involves the use of state procedural law to insure that a borrower cannot declare bankruptcy.

To read the full text of this article by Duane Morris partner Stephen M. Honig, please visit the New England In-House website.