Vol 21 (2024) - Issue 4

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In the Gabay Chapter 15 Case, Attempt to Limit Foreign Representatives’ Business Judgment in Section 363 Sale Fails

Synopsis
What is the process for the sale of assets in chapter 15 cases and what is the standard of approval? Much like in chapter 7 or chapter 11 cases, section 363 of the United States Bankruptcy Code (the ‘Bankruptcy Code’) applies – automatically upon recognition of a foreign main proceeding and upon further request for relief in foreign non-main roceedings. The standard of review is the deferential business judgment.
In In re Isak Henry Gabay, the limits of a foreign representatives’ business judgment in a section 363 sale were tested. There, the debtor (an individual) attempted to curb the foreign representatives’ discretion by imposing a deadline for the foreign representatives’ sale of the debtor’s assets in the U.S. The court denied the debtor’s request, finding no convincing reason to question the foreign representatives’ business judgment.