Bankruptcy Venue Reform Act of 2021
Bill: H.R.4193 | Sponsor: Rep. Lofgren, Zoe (D-CA)
Policy area: Law

Summary:
Bankruptcy Venue Reform Act of 2021
This bill limits where a non-individual debtor (e.g., a corporate debtor) may file for bankruptcy.
Specifically, these debtors must file in the district court for the district in which the principal place of business or principal assets of the debtor are located. Such a debtor may also file in a district where there is a pending bankruptcy case concerning an affiliate that has a certain level of control or ownership of the debtor (e.g., if the affiliate is a controlling shareholder of the debtor), if that pending case is in a proper venue under this bill.
Under current law, these debtors may also file where they are domiciled (i.e., incorporated) or where there is a bankruptcy case pending concerning an affiliate, general partner, or partnership.
For certain debtors who are issuers of securities, their principal place of business is defined in the bill as the address of the entity's principal executive office as provided in specified Securities and Exchange Commission filings.

To amend title 28, United States Code, to modify venue requirements 
                  relating to bankruptcy proceedings.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Bankruptcy Venue Reform Act of 
2021''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--Congress finds that--
            (1) bankruptcy law provides a number of venue options for 
        filing bankruptcy under chapter 11 of title 11, United States 
        Code, including, with respect to the entity filing bankruptcy--
                    (A) any district in which the place of 
                incorporation of the entity is located;
                    (B) any district in which the principal place of 
                business or principal assets of the entity are located; 
                and
                    (C) any district in which an affiliate of the 
                entity has filed a pending case under title 11, United 
                States Code;
            (2) the wide range of permissible bankruptcy venue options 
        has led to an increase in companies filing for bankruptcy 
        outside of their home States--the district in which the 
        principal place of business or principal assets of the company 
        is located;
            (3) the practice described in paragraph (2) is known as 
        ``forum shopping'';
            (4) forum shopping has resulted in a concentration of 
        bankruptcy cases in a limited number of districts;
            (5) forum shopping--
                    (A) prevents small businesses, employees, retirees, 
                creditors, and other important stakeholders from fully 
                participating in bankruptcy cases that have tremendous 
                impacts on their lives, communities, and local 
                economies; and
                    (B) deprives district courts of the United States 
                of the opportunity to contribute to the development of 
                bankruptcy law in the jurisdictions of those district 
                courts; and
            (6) reducing forum shopping in the bankruptcy system will 
        strengthen the integrity of, and build public confidence and 
        ensure fairness in, the bankruptcy system.
    (b) Purpose.--The purpose of this Act is to prevent the practice of 
forum shopping in cases filed under chapter 11 of title 11, United 
States Code.

SEC. 3. VENUE OF CASES UNDER TITLE 11.

    Title 28, United States Code, is amended--
            (1) by striking section 1408 and inserting the following:
``Sec. 1408. Venue of cases under title 11
    ``(a) Principal Place of Business With Respect to Certain 
Entities.--
            ``(1) In general.--Except as provided in paragraph (2), for 
        the purposes of this section, if an entity is subject to the 
        reporting requirements of section 13 or 15(d) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78m, 78o(d)), the term 
        `principal place of business', with respect to the entity, 
        means the address of the principal executive office of the 
        entity as stated in the last annual report filed under that Act 
        before the commencement of a case under title 11 of which the 
        entity is the subject.
            ``(2) Exception.--With respect to an entity described in 
        paragraph (1), the definition of the `principal place of 
        business' under that paragraph shall apply for purposes of this 
        section unless another address is shown to be the principal 
        place of business of the entity by clear and convincing 
        evidence.
    ``(b) Venue.--Except as provided in section 1410, a case under 
title 11 may be commenced only in the district court for the district--
            ``(1) in which the domicile, residence, or principal assets 
        in the United States of an individual who is the subject of the 
        case have been located--
                    ``(A) for the 180 days immediately preceding such 
                commencement; or
                    ``(B) for a longer portion of the 180-day period 
                immediately preceding such commencement than the 
                domicile, residence, or principal assets in the United 
                States of the individual were located in any other 
                district;
            ``(2) in which the principal place of business or principal 
        assets in the United States of an entity, other than an 
        individual, that is the subject of the case have been located--
                    ``(A) for the 180 days immediately preceding such 
                commencement; or
                    ``(B) for a longer portion of the 180-day period 
                immediately preceding such commencement than the 
                principal place of business or principal assets in the 
                United States of the entity were located in any other 
                district; or
            ``(3) in which there is pending a case under title 11 
        concerning an affiliate that directly or indirectly owns, 
        controls, or holds 50 percent or more of the outstanding voting 
        securities of, or is the general partner of, the entity that is 
        the subject of the later filed case, but only if the pending 
        case was properly filed in that district in accordance with 
        this section.
    ``(c) Limitations.--
            ``(1) In general.--For the purposes of paragraphs (2) and 
        (3) of subsection (b), no effect shall be given to a change in 
        the ownership or control of an entity that is the subject of 
        the case, or of an affiliate of the entity, or to a transfer of 
        the principal place of business or principal assets in the 
        United States of an entity that is the subject of the case, or 
        of an affiliate of the person entity, to another district, that 
        takes place--
                    ``(A) within 1 year before the date on which the 
                case is commenced; or
                    ``(B) for the purpose of establishing venue.
            ``(2) Principal assets.--
                    ``(A) Principal assets of an entity other than an 
                individual.--For the purposes of subsection (b)(2) and 
                paragraph (1) of this subsection--
                            ``(i) the term `principal assets' does not 
                        include cash or cash equivalents; and
                            ``(ii) any equity interest in an affiliate 
                        is located in the district in which the holder 
                        of the equity interest has its principal place 
                        of business in the United States, as determined 
                        in accordance with subsection (b)(2).
                    ``(B) Equity interests of individuals.--For the 
                purposes of subsection (b)(1), if the holder of any 
                equity interest in an affiliate is an individual, the 
                equity interest is located in the district in which the 
                domicile or residence in the United States of the 
                holder of the equity interest is located, as determined 
                in accordance with subsection (b)(1).
    ``(d) Burden.--On any objection to, or request to change, venue 
under paragraph (2) or (3) of subsection (b) of a case under title 11, 
the entity that commences the case shall bear the burden of 
establishing by clear and convincing evidence that venue is proper 
under this section.
    ``(e) Out-of-State Admission for Government Attorneys.--The Supreme 
Court shall prescribe rules, in accordance with section 2075, for cases 
or proceedings arising under title 11, or arising in or related to 
cases under title 11, to allow any attorney representing a governmental 
unit to be permitted to appear on behalf of the governmental unit and 
intervene without charge, and without meeting any requirement under any 
local court rule relating to attorney appearances or the use of local 
counsel, before any bankruptcy court, district court, or bankruptcy 
appellate panel.''; and
            (2) by striking section 1412 and inserting the following:
``Sec. 1412. Change of venue
    ``(a) In General.--Notwithstanding that a case or proceeding under 
title 11, or arising in or related to a case under title 11, is filed 
in the correct division or district, a district court may transfer the 
case or proceeding to a district court for another district or 
division--
            ``(1) in the interest of justice; or
            ``(2) for the convenience of the parties.
    ``(b) Incorrectly Filed Cases or Proceedings.--If a case or 
proceeding under title 11, or arising in or related to a case under 
title 11, is filed in a division or district that is improper under 
section 1408(b), the district court shall--
            ``(1) immediately dismiss the case or proceeding; or
            ``(2) if it is in the interest of justice, immediately 
        transfer the case or proceeding to any district court for any 
        district or division in which the case or proceeding could have 
        been brought.
    ``(c) Objections and Requests Relating to Changes in Venue.--Not 
later than 14 days after the filing of an objection to, or a request to 
change, venue of a case or proceeding under title 11, or arising in or 
related to a case under title 11, the court shall enter an order 
granting or denying the objection or request.''.
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