The Impact of Your Partner’s Bankruptcy on Your Joint Venture

This article examines the effect of assumption or rejection on the non-filing joint venture members when a joint venture’s operating agreement is characterized as an executory contract and subject to assumption or rejection under the Bankruptcy Code by the co-venturer that filed for bankruptcy protection. The article presents a hypothetical to analyze the effect of dissociation, the effect of bankruptcy on managerial rights, and liquidation of the joint venture. Finally, the article provides practical considerations for protecting joint venture members prior to a bankruptcy and what to do when a partner is in financial distress.