State law veto right applies to bankruptcy filings

“Federal law does not prevent a bona fide shareholder from exercising its right to vote against a bankruptcy petition just because it is also an unsecured creditor. Under these circumstances, the issue of corporate authority to file a bankruptcy petition is left to state law.” Accordingly, when (a) the debtor is a Delaware corporation, (b) governed by that state’s General Corporation Law, and (c) nothing in that law would nullify the sole preferred shareholder’s right to vote against the bankruptcy petition, that shareholder has the right to vote against – and thus prevent – the corporation’s filing of a voluntary bankruptcy petition. Franchise Services. v. U.S. Trustee, No. 18-60093 (May 22, 2018).