Texas two-step

English

Noun

Texas two-step (plural Texas two-steps)

1. (law, business) A two-step bankruptcy strategy under US bankruptcy law in which a solvent parent company spins-off liabilities into a new company, and then has that new company declare bankruptcy.
   • Levin, Matt (2023 February 1) “Johnson & Johnson’s Bankruptcy Didn’t Work”, in Money Stuff‎^[1], Bloomberg:

     This is called the “Texas two-step.” In its extreme form it sounds like very bad cheating: You can’t really put all the liabilities and none of the money in the box; that is just a way to defraud victims, and surely they’d find a way to do something about it. But a milder form of the Texas Two-Step is that you put the liabilities in the box, put the box in bankruptcy, but have the parent company guarantee its product liabilities.

Further reading

• https://www.investopedia.com/texas-two-step-bankruptcy-definition-5225888