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ARTICLE · 20 MARCH 2023

The Texas Two-Step Is Alive And Well

Cowles & Thompson, PC
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The "Texas Two-Step" has proved to be a lifeline allowing companies to form in such a way that protects assets from bankruptcy claims.

United StatesInsolvency/Bankruptcy/Re-Structuring
Bill Siegel
Bill Siegel
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In re LTL Mgmt. LLC, No. 21-30589 (MBK) [Docket No. 1572] (Bankr. D.N.J. 2021)

Other than being a dance, what is the Texas Two-Step, in terms of corporate mergers?

The "Texas Two-Step" has proved to be a lifeline allowing companies to form in such a way that protects assets from bankruptcy claims. Take for example Johnson & Johnson ("J&J"), which is facing "Talc Litigation" throughout the country. In Texas, the "Two-Step" allows J&J and other companies facing mass tort litigation to protect vital assets and transfer the liabilities to a newly-created entity, all of which is permitted in the divisive merger statute in the Texas Business Organizations Code.

The "Divisive Merger"

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