CA-8.2.22
The conditions for bankruptcy remoteness include the following:
(a) If there were a bankruptcy of the issuer, the assets of the issuer will be distributed in accordance with the law or a court order, rather than in accordance with the contractual arrangements involving the issuer;
(b) Separateness covenants are required to ensure bankruptcy remoteness (as well as non-consolidation); and
(c) Another provision to ensure bankruptcy remoteness relates to noncompetition and bankruptcy declarations. The originator, investors, credit enhancers and others agree in the transaction documents not to initiate involuntary bankruptcy proceedings against the issuer. The issuer also provides, in both its constitutive documents and the transaction documents, not to initiate voluntary bankruptcy proceedings. The parties must seek a legal opinion from jurists in the jurisdiction concerned and ensure that these types of agreements and warranties are legally valid and enforceable.
January 2015