bankruptcy-remote

bankruptcy-remote
USA
Term used to describe an entity formed to develop, own and operate a special project while isolating financial risk and minimizing bankruptcy risk, such as a single purpose entity, a special purpose vehicle (SPV) or a special purpose entity (SPE). A bankruptcy-remote entity is typically prohibited from incurring debt or other obligations, and is limited in its purpose and the activities in which it may engage. Often, the entity's sole asset is the property securing a loan or debt obligation and its sole purpose is to own and manage such property. To isolate financial risk, a bankruptcy-remote entity is structured to meet strict accounting requirements to qualify for off-balance sheet treatment. Other restrictions are often put in place to reduce the risk that the entity itself will voluntarily file for bankruptcy, be involuntarily forced into bankruptcy as a result of substantive consolidation with an affiliate's bankruptcy or otherwise be adversely affected by a bankruptcy of its parent or affiliates.
See also

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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