Bankruptcy Remote Law and Legal Definition

Bankruptcy remote is a term that describes the relative position of one company as it relates to bankruptcy with regard to others within a corporate group. Many a times, when a company that is part of a larger corporate group of businesses files for bankruptcy, creditors of the company in bankruptcy may attempt to seek debt satisfaction from other companies in the group. The concept of remote bankruptcy prevents such action. No matter the negative financial condition of entity in bankruptcy, the related holding company, subsidiaries or affiliate enterprises will be unaffected. Usually, for a corporate group to be able to benefit from the doctrine of bankruptcy remote, that system must be well established. In other words, the affiliated company system should not be of recent origin.