Recent Developments in Cross-Border Restructuring Under Chapter 15 of the Bankruptcy Code

Multi-national companies continue to grow and expand their global networks, with subsidiaries, assets, creditors, and contracts spanning across multiple jurisdictions, and the need for a coherent legal process to coordinate insolvency proceedings across borders has grown correspondingly. A restructuring that might once have involved assets and creditors concentrated in one or two countries now routinely implicates a dozen or more jurisdictions simultaneously. One of those jurisdictions very often includes the U.S. Indeed, the rise of sophisticated international capital markets means that foreign companies frequently have U.S.-law-governed debt, U.S.-based bondholders, or assets held through U.S. entities.

Many distressed multi-national companies with ties to the U.S., however, now elect to restructure in jurisdictions other than the U.S.¹ to take advantage of tools that are not available under the U.S. Bankruptcy Code (e.g., non-consensual third-party releases, reverse vesting orders²). As a result, recognition of those foreign proceedings in the U.S. under Chapter 15 of the Bankruptcy Code has become the essential mechanism for giving foreign plan confirmations and other orders from foreign proceedings legal effect in the U.S. to bind the foreign debtor’s U.S.-based creditors and protect its U.S.-based assets. With all that may be at stake for entities engaged in cross-border restructurings and so much of their success potentially dependent on recognition under Chapter 15, in this article, we discuss three noteworthy decisions from various U.S. bankruptcy courts that address whether to recognize the foreign insolvency proceeding of a cannabis company, when Chapter 15 relief may not be available because the foreign proceeding is not in a jurisdiction from which the debtor has its center of main interests or an establishment, and whether Chapter 15 debtors must have U.S.-based assets as of the Chapter 15 petition date. First, though, we briefly delve into the standards for recognition under Chapter 15 and discuss the beneficial consequences of recognition.

Recognition Standards Under Chapter 15 and the Beneficial Consequences of Recognition

Chapter 15 of the Bankruptcy Code governs cross-border insolvency cases, and recognition under it, either as a “foreign main proceeding” or as a “foreign non-main proceeding,” is significant for several reasons.³ The Bankruptcy Code provides that a foreign main proceeding is “a foreign proceeding pending in the country where the debtor has the center of its main interests [(COMI)].”⁴ “In the absence of evidence to the contrary, the debtor’s registered office, or habitual residence in the case of an individual, is presumed to be the center of the debtor’s main interest,”⁵ and COMI generally should be determined based on the debtor’s activities as of the Chapter 15 petition date.⁶

When a debtor’s foreign proceeding is granted recognition as a foreign main proceeding, it triggers an automatic stay that halts virtually all U.S. litigation and enforcement actions against the debtor and its U.S.-based assets, including attempts to transfer or seize those assets. Recognition is also material because it grants the debtor’s foreign representative legal standing to operate in U.S. courts, allowing the representative to gather evidence, pursue claims, and administer assets located in the U.S. that may otherwise be inaccessible.

The Bankruptcy Code further provides that a foreign non-main proceeding is “a foreign proceeding, other than a foreign main proceeding, pending in a country where the debtor has an establishment.”⁷ An “establishment” means “any place of operations where the debtor carries out nontransitory economic activity,”⁸ and courts generally analyze whether a debtor has an establishment in the jurisdiction in which the foreign proceeding is pending as of the Chapter 15 petition date.⁹

Recognition as a foreign non-main proceeding under Chapter 15 carries less automatic force than recognition as a foreign main proceeding. In foreign non-main proceedings, U.S. bankruptcy courts appoint foreign representatives who are granted standing to appear and be heard in U.S. courts and the ability to seek tailored injunctive relief to protect the debtor’s U.S. assets. Unlike main proceeding recognition, non-main recognition does not trigger an automatic stay. Instead, any such relief is discretionary, meaning the foreign representative must affirmatively petition the U.S. bankruptcy court for protective measures, and the court weighs whether granting such relief would appropriately protect the interests of creditors and other interested parties.

Of course, courts may determine that foreign restructurings do not qualify as “foreign proceedings” under Bankruptcy Code section 101(23)¹⁰ or entirely decline to recognize a foreign proceeding as either main or non-main because the debtor has not adequately demonstrated that its foreign proceeding is pending where the debtor has its COMI or an establishment or where the debtor does not adequately demonstrate that it has property in the U.S. as of the Chapter 15 petition date.¹¹ Conversely, even if all the statutory requirements for recognition, either as a main or non-main proceeding, have been satisfied, courts may still decline to recognize foreign proceedings where the results from doing so would be “manifestly contrary to the public policy of the United States.”¹²

Recent Chapter 15 Recognition Decisions

Recently, three U.S. bankruptcy courts have issued key decisions on petitions for recognition under Chapter 15 that may have go-forward impact on cross-border restructurings. We discuss those decisions below.

In re The Cannabist Company Holdings, Inc.¹³

This decision is significant for two reasons: first, it demonstrates that distressed cannabis companies may potentially access U.S. bankruptcy protections by routing their restructurings through foreign jurisdictions with more relaxed approaches to cannabis; and second, it reflects growing federal tolerance toward extending legal protections to cannabis-related enterprises. The Cannabist Company Holdings Inc. (Cannabist Holdings) is a Canadian holding company that indirectly owns and operates legal cannabis businesses across eight U.S. states where medical or adult-use marijuana is legally permitted.¹⁴ To help fund operations, Cannabist Holdings and its Canadian affiliate, The Cannabist Company Holdings (Canada) Inc. (Cannabist Canada and together with Cannabist Holdings, Cannabist), borrowed approximately $180 million by issuing bonds governed by Canadian law. Cannabist subsequently ran into economic trouble due to increased competition, supply chain problems, and difficulty borrowing and raising more money. In January 2026, Cannabist missed a payment due on those bonds and, in response, started selling off parts of the business and winding down others. To carry out those remaining sales in an orderly way with legal protection, Cannabist filed for insolvency in Canada under the CCAA.

Cannabist’s foreign representative then petitioned the Bankruptcy Court for the District of Delaware to recognize that Canadian proceeding, and asked the court to apply the Bankruptcy Code automatic stay protections to Cannabist’s non-debtor U.S. subsidiaries and their assets. Such relief, according to the foreign representative, was “practically necessary to ensure the uninterrupted operation of the Debtors’ business and protect the value of the Debtors’ subsidiaries, [to] maximize value for the Debtors’ stakeholders, who have claims against the Debtors and their subsidiaries.”¹⁵

A creditor of certain non-debtor U.S. subsidiaries objected to Cannabist’s Chapter 15 petition, arguing that: (a) section 1506 of the Bankruptcy Code bars recognition because the enterprise’s underlying cannabis cultivation, manufacturing, and sales activities contravene U.S. federal law, specifically the Controlled Substances Act; and (b) the automatic stay under section 362(a) of the Bankruptcy Code should not apply to non-debtors, i.e., Cannabist’s non-debtor U.S. subsidiaries, or property owned by non-debtors. Notably, the U.S. Trustee did not file a written objection to Cannabist’s Chapter 15 petition for any reason, including its ties to the cannabis industry. This was a departure from the U.S. Trustee’s approach in prior cannabis-related bankruptcy matters.¹⁶

Cannabist’s foreign representative and the objecting creditor appear to have settled the dispute, submitting a proposed order granting recognition that did not alter the proposed injunction with respect to Cannabist’s non-debtor U.S. subsidiaries, but it did include a narrowly tailored reservation of rights allowing the objecting creditor to resume litigating its objection, with any resulting ruling limited so as not to affect recognition as to any other parties. The court ultimately entered the order granting recognition, but it did not issue a memorandum decision explaining its reasoning. The court’s entry of the recognition order, along with broader rescheduling of cannabis as a controlled substance,¹⁷ potentially signals greater acceptance from federal bodies concerning these substances.

Indeed, U.S. cannabis companies have historically had difficulty employing Chapters 7 and 11 of the Bankruptcy Code to restructure, given that cannabis is still illegal under U.S. federal law and U.S. bankruptcy courts may not administer illegal enterprises.¹⁸ This decision demonstrates that by routing the bankruptcy through Canada and only asking the court to recognize the Canadian case, rather than actually administering the cannabis business itself, Cannabist may have sidestepped that problem. Undoubtedly, the lack of a live objection by parties in interest, including the U.S. Trustee, informed the court’s willingness to grant relief. Perhaps crucially to the court, the two entities that actually filed Chapter 15 petitions were holding companies only, meaning neither held cannabis licenses nor directly touched cannabis operations. That distinction may have mattered because it meant the U.S. bankruptcy court did not have to directly oversee an ongoing cannabis business or deal with assets that are still federally prohibited. Instead, the court could simply extend the Canadian court’s protections to cover the company’s non-debtor U.S. subsidiaries and assets without getting entangled in the federal illegality question.

In re Alexander Zheleznyak¹⁹

This decision underscores that, in some instances, Chapter 15 recognition may be unavailable because the foreign proceeding at issue does not amount to either a main or non-main proceeding. Alexander Zheleznyak is a Russian-Israeli citizen and former co-founder of Probusinessbank, a large Russian bank that was declared bankrupt after its license was revoked in 2014. Shortly after, Zheleznyak and other directors of the bank were declared responsible for the bank’s collapse due to mismanagement and embezzlement. Criminal cases were initiated in connection with the embezzlement allegations, but no judgment has been entered against Zheleznyak because he is not present in Russia. Zheleznyak left Russia in January 2016, when he moved to Israel, and now resides in the U.S.

In August 2019, Probusinessbank’s application in Russia to declare Zheleznyak bankrupt was granted, and a Russian bankruptcy trustee was appointed. In March 2026, the Russian bankruptcy trustee filed a petition in the U.S. Bankruptcy Court for the District of Massachusetts seeking U.S. recognition of the ongoing Russian insolvency proceeding — either as a “foreign main proceeding” or a “foreign nonmain proceeding” — which would have allowed him to obtain an automatic stay and standing to secure broad discovery into Zheleznyak’s U.S. assets. Zheleznyak opposed the petition on the merits and also raised public policy objections, arguing that the Russian proceeding is politically motivated and corrupt.

The court denied the petition in full. On the “foreign main proceeding” question, the court held that because Zheleznyak’s habitual residence is undisputedly in the U.S., his COMI is presumed to be here, and the Russian bankruptcy trustee failed to rebut that presumption — Zheleznyak’s Russian citizenship, prior legal income in Russia (last earned in 2019), bar membership, and Russian property ownership were all found insufficient to shift his COMI to Russia. On the “foreign nonmain proceeding” question, the court held that Zheleznyak lacks an “establishment” in Russia because he has not conducted any nontransitory economic activity there since 2016. More specifically, the court held that merely owning property in a country that one has not visited in nearly a decade amounts to no more than passive asset maintenance. Because neither recognition standard was met, the court did not address Zheleznyak’s argument that the petition should be denied due to the Russian government’s political motivations or his other associated relief requests.

In re Siu-Fung Ceramics Holdings Limited²⁰

This decision is significant for two reasons. First, courts are split over whether a debtor must, as a precondition to availing itself of Chapter 15’s benefits, have property in the U.S. on the Chapter 15 petition date. This court held that a debtor must have U.S.-based assets on the petition date. Second, the court held that in certain circumstances, none of which were present here, non-speculative potential U.S. litigation claims may be sufficient to satisfy the requirement that the debtor have property in the U.S. on the Chapter 15 petition date.

Liquidators sought recognition under Chapter 15 of two related Hong Kong foreign proceedings in the Bankruptcy Court for the Southern District of Texas: the liquidation of the Siu-Fung Group and the personal bankruptcy of its former owner, Siu-Fung Siegfried Lee. At the time the Chapter 15 petitions were filed, both Hong Kong proceedings had been pending for approximately 25 years, suffering through years of highly contentious litigation involving investigations into the Siu-Fung Group’s collapse and Mr. Lee’s contributions, and Mr. Lee had been living in the U.S. for approximately eight years. Indeed, the Hong Kong liquidators sought Chapter 15 recognition to achieve access to U.S. courts and employ U.S. law discovery mechanisms to gain insights into Mr. Lee, his assets, and his contributions to the Siu-Fung Group’s collapse.²¹

The court agreed that the Siu-Fung Group’s COMI was Hong Kong, but still declined to recognize its Hong Kong proceeding, either as main or non-main, because the liquidators did not adequately demonstrate that the Siu-Fung Group had assets in the U.S. on the Chapter 15 petition date. The liquidators argued that the Siu-Fung Group did have assets in the U.S. by virtue of the legal retainer paid to U.S. counsel and the potential for them to assert U.S. litigation claims. The court rejected both arguments, holding that postpetition funding of a retainer for counsel is insufficient and that, here, the potential U.S. litigation claims also were insufficient because even the liquidators acknowledged them as speculative and tied to assets located outside the U.S. The court, however, did leave open the possibility that, under different circumstances, potential U.S. litigation claims could result in a finding that the debtor has assets in the U.S.

The court also denied recognition of Mr. Lee’s personal insolvency proceeding, this time based on the liquidators’ failure to establish that his COMI is in Hong Kong or that he has an establishment there. Because Mr. Lee left Hong Kong in 2016 and had been a continuous resident in the U.S. since 2017, and because nothing in the record suggested that he planned to return to Hong Kong or that he maintained any ongoing business presence there, the court held that his personal insolvency proceeding qualified neither as a foreign main proceeding nor a foreign non-main proceeding.

© Arnold & Porter Kaye Scholer LLP 2026 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.