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Business Dealings With Bankrupt and Prospectively Bankrupt Parties

Harold G. Morris, Jr., Proceedings of 38th Annual Rocky Mountain Mineral Law Institute (1992)

This paper is intended to provide practical assistance for minerals companies in transacting business with financially troubled entities. It emphasizes property acquisitions, as well as practical and contractual attempts at protection against Bankruptcy Code provisions which may operate to upset investment-backed and bargained-for expectations. In conclusion, mining businesses are urged to strongly consider utilizing, where available, the statutory limited liability company as a choice of entity to minimize the disruption which invariably follows the insolvency or bankruptcy of a co-venturer.

§ 13.02 Convenience References

The Bankruptcy Reform Act of 1978, as amended,1 will be referred to throughout as the Code. Section citations refer to [13-3] the codifications contained in Title 11 of the United States Code. The Court will mean the bankruptcy court exercising jurisdiction in a particular case. References to a trustee or debtor in possession, particularly with respect to the use of voiding powers, may be interchangeable.2 In Chapter 7 liquidation cases there will be a trustee who may exercise such powers. In Chapter 11 reorganization cases, a trustee will not be appointed unless a party in interest so requests and proves that there are grounds for replacing current management. In the absence of such appointment, management will act as the debtor in possess