A provision of the Employee Abuse Prevention Act of 2002, introduced last week by Sen. Dick Durbin, D-Ill., and Rep. William Delahunt, D-Mass., would prevent companies incorporated in Delaware from filing for bankruptcy in the state if they don't have their headquarters or principle assets here. The aim is to make bankruptcy proceedings accessible to more workers and retirees.Now, there are a large number of businesses incorporated in Delaware that have their headquarters or principal place of business located elsewhere. Delaware is a popular choice as a place for many companies to go through bankruptcy proceedings. Is an argument that it was chosen as a location because it would be more difficult for employees and retirees to have representation in such a proceeding a valid one?
The reason for the legislative package itself is something that may find little argument amongst legislators:
"The backdrop here is that we have had a number of high-profile cases where officers have looted the company and employees have little power in bankruptcy right now to try and recoup losses when officers have pillaged their savings and retirement earnings," said Travis Plunkett of Consumer Federation of America. "It is important for employees to have the option to participate in a bankruptcy proceeding."But, is the venue of such a proceeding important? Is it possible that the venue provision can be severed from the remainder of the bill, and the Act can still protect those people being harmed?
Here is the House version of the bill (H.R. 5221) and the Senate version (S. 2798). Both have been referred to the committes on the judciary for each.
For those in Delaware concerned about whether or not the venue of a bankruptcy filing will be limited to the principal place of business, and no longer permitted to be filed in the state of incorporation, these committees will probably give that issue a considerable amount of scrutiny.
