![]() ![]() However, the bankruptcy court considered the public policy of promoting access to bankruptcy relief and balanced the right of a business to file for bankruptcy against any limits in its governing agreements on the corporate authority to do so. The bankruptcy court did not dispute that the relevant limited liability company agreement required SL Green to consent to a bankruptcy filing of one of the Debtors and noted that, generally, a corporate entity’s action contravening the authority in its constituent agreements is void. In what it called a “close decision,” the bankruptcy court denied the motion to dismiss. ![]() SL Green’s motion to dismiss highlights a tension, addressed in a series of bankruptcy cases over the last decade, between two fundamental principles of bankruptcy law: (1) an entity must have proper corporate authority under its organizational documents to seek bankruptcy relief and (2) prepetition agreements that prospectively prohibit bankruptcy filings may be void as against public policy, depending on the facts and circumstances in which they are invoked. SL Green also argued that the solvent Debtors were not experiencing financial distress and had filed for chapter 11 protection (and moved to reject the management agreement for 245 Park) as leverage in a two-party dispute with SL Green, and thus had not filed for bankruptcy in good faith. SL Green argued that HNA improperly empowered two newly appointed Independent Agents of the Debtors to authorize the bankruptcy filing and, more importantly, that the limited liability company agreement governing the Debtor in which SL Green was a minority member specifically required the SL Green member’s consent to authorize a bankruptcy filing, which consent was not obtained. SL Green moved to dismiss all the chapter 11 filings on two grounds: the bankruptcy petitions were not properly authorized and were not filed in good faith. HNA, a Chinese real estate conglomerate, is the majority owner of the Debtors and of the entity which favored a chapter 11 filing for the Debtors. (collectively with its affiliates, “SL Green”) was the property manager at 245 Park, a minority owner in one Debtor, and a mezzanine lender to another. The Debtors hold direct or indirect interests in two real properties-245 Park Avenue in New York City (“245 Park”) and 181 West Madison Street in Chicago (the “Chicago Property”). On October 31, 2021, PWM Property Management LLC and eight of its affiliates (collectively, “PWM” or the “Debtors”) filed chapter 11 petitions in the United States Bankruptcy Court for the District of Delaware.
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