. . . an interest of the debtor in the property becomes the property of the estate. . . . Regardless of a provision of a contract, a transfer instrument or an unenforceable law, in order to achieve the maximum value of an enforceable contract, the agent (or debtor) must be able to retain the contract rights package upon remediation or assign the contract rights package to a third party. However, some LLC articles purport to cause the loss of the rights of a member of the LLC in the event of the member`s bankruptcy. For example, a standard provision of the Delaware Limited Liability Company Act is that a member ceases to be a member when a voluntary insolvency application is filed.

Del. Code Ann. tit. 6, § 18-304. In addition, LLC enterprise agreements, such as the hypothetical agreement in this article, often purport to separate a member in the event of a member`s bankruptcy. The construction of Article 365(c) is further complicated by its uncertain relationship with Article 365(f). Section 365(f) provides that an enforceable contract may be assigned regardless of a contractual provision or “applicable law” prohibiting the assignment. However, it is expressly subject to Article 365(c) which states that the “applicable law” that releases part of the acceptance of the performance by an entity other than the debtor makes an enforceable contract non-reducible (and irreplaceable). An enforceable contract is therefore assigned, regardless of the “applicable law” that prohibits the assignment, but is subject to the “applicable law” that prohibits the assignment! 3. Notwithstanding any provision of an enforceable performance agreement or a lease not expired by the debtor or in applicable law, which terminates or amends that agreement or a lease or an obligation arising out of such a contract or lease as a result of an assignment of such contract or lease, or authorizes a party other than the debtor, Cancel or modify such contract or rental agreement, such contract, lease, right or obligation may not, in accordance with this provision, be terminated or modified by reason of the acceptance or assignment of such contract or lease by the agent. In contrast, at In re Garrison-Ashburn, 253 b.R.

700 (E.D. Va. 2000), the General Court concluded that the company agreement at issue was not enforced, since it constituted only the structure of the company`s management and did not contain any obligation to provide additional capital, no obligation to participate in management and no obligation to provide the company with personal expertise or service. The above language is clear and the case law is consistent when it comes to ensuring that the economic interests of a debtor become the property of an LLC of the bankruptcy estate, regardless of the ipso facto provisions of company agreements or LLC articles of association which are the opposite. Indeed, at first sight, it appears that, on the basis of the language of Article 541 (c) (1), all the rights linked to an LLC interest – economic and not economic – should be part of the bankruptcy estate. There are 4 important provisions that you and your attorney must include in the company agreement to make them bulletproof in the insolvency proceedings of an LLC member: West Electronics is known as the first appeal case to establish the “hypothetical test” for accepting a binding contract pursuant to Section 365(c). After the “hypothetical test” of acceptance of an enforceable contract, the court, regardless of a debtor`s actual intention to assign an enforceable contract, must verify whether the “applicable law” would require the agreement of the non-liable party if the DIP attempts “hypothetically” to assign the contract. . . .