Sino Clean Energy, Inc. v. Seiden

By removing the incumbent board, a receiver can bar the old board from filing a bankruptcy petition, the Ninth Circuit holds.

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Case Type:
Case Status:
No. 17-15316 (9th Circuit, Aug 27,2018) Published
Former members of the board of directors of a Nevada corporation, who had been removed by the receiver for the corporation, did not have standing under Nevada law to file a bankruptcy petition on behalf of the corporation.
Procedural context:
The bankruptcy court dismissed the chapter 11 petition filed on behalf of a Nevada corporation by its former directors. The district court affirmed the bankruptcy court.
The debtor, Sino Clean Energy, Inc. (SCEI), was a Nevada corporation. The Securities and Exchange Commission deregistered SCEI after SCEI failed to file certain required forms and financial information. The NASDAQ suspended trading in SCEI's shares. 43 shareholders filed an action in Nevada in an attempt to get financial information from SCEI. SCEI failed to respond to the complaint, and the plaintiffs moved for entry of default. The court entered default against SCEI, and subsequently appointed a receiver for SCEI. The order appointing the receiver granted the receiver the authority to reconstitute SCEI's board of directors. The receiver subsequently fired the directors. SCEI's former chairman and CEO subsequently claimed to reconstitute the former SCEI board of directors. The "recontituted" board of directors purported to authorize SCEI to file a chapter 11 petition.
Graber, Tallman, and Ivan L.R. Lemelle (Senior District Judge, E.D. La., sitting by designation)

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