A provision in LLC's corporate governance document, the sole purpose and effect of which is to place into the hands of a single minority holder (who happens to be a Creditor of the LLC) the ultimate authority to deny the right of the LLC to seek bankruptcy relief has been held void as contrary to federal public policy.

In the matter of In re Intervention Energy Holdings, LLC, Judge Kevin J. Carey held even if state law arguably permitted parties to contract away the right to seek bankruptcy protection, the federal public policy assuring the rights of persons (including business entities) access to seek federal bankruptcy protection authorized by Constitution and enacted by Congress, was controlling.

Debtor is an oil and natural gas exploration/production company who entered into a loan agreement with EIG for up to two hundred million dollars ($200,000,000.00). The loan was secured by various assets of the Debtor and in a subsequent note amendment, Debtor agreed to certain positive debt covenant calculations. In October 2015, EIG declared an event of default based on the Debtors' failure to comply with said covenants. Subsequent to the default, Debtor and EIG entered into a Forbearance Agreement, whereby as a condition precedent to the forbearance, Debtor was to add EIG as a member of the LLC and amend its LLC agreement to require the approval of all LLC members prior to the filing of voluntary bankruptcy.

Debtor filed a voluntary Chapter 11 petition on May 20, 2016. Not surprisingly, EIG objected to the filing as unauthorized. The court was asked to weigh EIG's argument that state law allowed Debtor contract away its right to file bankruptcy, citing cases where courts upheld consent provisions among LLC members versus Debtor's argument the "golden share" given to EIG was similar to the blocking director installed on the board of a special purpose entity in the recent matter of In re Lake Michigan Beach Pottawatamie Resort LLC; essentially that a blocking member must retain a duty to vote in the best interest of the potential debtor and otherwise not abrogate its fiduciary duty.

Judge Carey had no interest in deciding the scope of LLC members' freedom to contract under Delaware law. Instead, he focused on the long held principal that a debtor may not contract away the right to a discharge in bankruptcy, noting it has been said many times and in many ways that prepetition agreements purporting to interfere with the debtor's rights under the bankruptcy code are not enforceable and otherwise wholly void as against public policy. The court concluded the parties here clearly contracted away the right to seek bankruptcy relief and despite EIG's arguments they negotiated, bought and paid for their rights, the intent of the parties was unmistakable and for that reason, unpersuasive.