bankruptcy remote entity
bankruptcy-remote entity. A business entity formed in a manner designed to minimize the risk of becoming a debtor in a bankruptcy case. • The entity’s organizational charter usu. requires at least one independent director to be appointed, as well as a unanimous vote by the entity’s directors, before a bankruptcy petition may be filed. The business is usu. a special-purpose entity established to perform limited functions, such as to purchase and hold accounts receivable or other financial assets that generate revenue. It also has only one or a few primary creditors, to reduce the likelihood of an involuntary bankruptcy. A bankruptcy-remote entity will sometimes issue securities instead of receiving a loan from a financial institution. See SINGLE-PURPOSE PROJECT; SPECIAL-PURPOSE ENTITY; project financing under FINANCING.
