A delusion. The idea that contractual provisions, perhaps combined with a structural device such as an “independent” director with veto power over a bankruptcy filing, can absolutely prevent a debtor from filing a bankruptcy case because the debtor is now “bankruptcy proof.” This is a delusion. The courts are likely to strike down such contractual provisions and structural devices if they too directly prevent or somehow make it virtually impossible to file a bankruptcy case. But provisions designed to make a bankruptcy more “remote” are more likely to be upheld. See Special (or Single) Purpose Bankruptcy Remote Entity.
See also Independent Director, Special (or Single) Purpose Bankruptcy Remote Entity.