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In the context of bankruptcy, the term "affiliate" refers to entities or individuals that have a significant ownership or control relationship with a debtor. Specifically, it includes:
An entity that owns, controls, or holds the power to vote at least twenty percent of the debtor's voting securities.
A corporation where twenty percent or more of its voting securities are owned or controlled by the debtor or another affiliate.
A person whose business is operated under a lease or agreement with the debtor.
An entity that operates the debtor's business or property under a lease or agreement.
Table of content
Legal Use & context
The term "affiliate" is commonly used in bankruptcy law to identify relationships that may influence the debtor's financial situation. Understanding who qualifies as an affiliate is crucial for determining the scope of bankruptcy proceedings and the rights of creditors. This term is particularly relevant in:
Corporate bankruptcy cases, where ownership structures can complicate asset distribution.
Personal bankruptcy filings, where family members or business partners may be considered affiliates.
Users may find it beneficial to utilize legal templates from US Legal Forms to navigate these situations effectively.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A corporation, ABC Corp, owns twenty-five percent of the voting shares of a debtor company, XYZ LLC. In this case, ABC Corp is considered an affiliate of XYZ LLC.
Example 2: A person who leases a commercial property to a debtor and operates their business from that location may also be classified as an affiliate due to their operational relationship (hypothetical example).
Relevant laws & statutes
The key statute governing the definition of "affiliate" in bankruptcy is the Federal Bankruptcy Code, specifically 11 USCS § 101. This section outlines the criteria for determining affiliate relationships in bankruptcy contexts.
Comparison with related terms
Term
Definition
Key Differences
Debtor
A person or entity that owes money to creditors.
Affiliates may have ownership stakes or operational ties, while debtors are primarily defined by their financial obligations.
Creditor
A person or entity to whom money is owed.
Affiliates may influence the debtor's financial decisions, whereas creditors are primarily concerned with repayment.
Common misunderstandings
What to do if this term applies to you
If you believe you may be classified as an affiliate in a bankruptcy case, consider the following steps:
Review your ownership or control of the debtor's securities.
Consult with a legal professional to understand your rights and obligations.
Explore US Legal Forms for templates that may assist in documenting your relationship with the debtor.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.
Ownership Threshold: 20 percent or more of voting securities.
Legal Context: Bankruptcy proceedings.
Potential Implications: Influence over debtor's financial decisions.
Key takeaways
Frequently asked questions
A person or entity that owns or controls at least twenty percent of a debtor's voting securities or has a significant operational relationship with the debtor qualifies as an affiliate.
Yes, affiliates can be creditors if they have lent money or provided credit to the debtor.
Being classified as an affiliate may impact your rights to claim against the debtor's assets and your involvement in bankruptcy proceedings.