Gibson Dunn explains Delaware Decision Invalidating Attempt to Prevent Bankruptcy Through “Golden Share”

A Delaware bankruptcy court has invalidated a lender’s attempt to prevent a borrower from filing bankruptcy by having the borrower amend its operating agreement to require unanimous consent among its members to file bankruptcy and then issuing one “golden share” to the lender.

In In re Intervention Energy Holdings, LLC,[1] the borrower had defaulted under a senior secured loan and subsequently entered into a forbearance agreement with its lender.  As part of the forbearance agreement, the lender required the borrower to agree to (a) amend its operating agreement to require approval of each holder of common units prior … Read more