[Arjuna]

This sounds like a similar strategy taken straight out of the Hollywood Accounting [1] playbook:

“On Friday, Reuters reported that J&J secretly launched ‘Project Plato’ last year to shift liability from about 38,000 pending Baby Powder talc lawsuits to a newly created subsidiary, which was then to be put into bankruptcy. By doing so, J&J could limit its financial exposure to the lawsuits.”

[1] https://en.m.wikipedia.org/wiki/Hollywood_accounting

[alistairSH]

At least with Hollywood accounting, the subsidiary is usually created up front. This reads like J&J created the subsidiary after the fact, which IMO, shouldn’t be allowed.

[tedivm]

It's also not uncommon to purchase an existing company, move debt over to it, and then kill it off. Late stage capitalism is an interesting phenomenon.

[tylersmith]

It's a much more interesting trick imo, where Texas allows "divisive mergers" that enable them to split liabilities off into a separate entity. It's not clear to me what the intended benefit of allowing this procedure is, other than this kind of action.

[mijoharas]

Yeah, I'm trying to understand how this is allowed? It seems like it's in incredibly bad faith. Can anyone explain how this can happen?

Taking this to it's extreme, can't you just buy some property so that you owe 1 million dollars, put that debt into it's own company and then say "sorry, that company is bankrupt, I can't pay".

Is that not what's happening here? I feel like I must be missing something.