On May 12, 2026, Chief Judge Martin Glenn of the United States Bankruptcy Court for the Southern District of New York issued a 27-page memorandum opinion in In re Iovate Health Sciences International Inc., Case No. 25-11958 (MG), recognizing and enforcing an Approval and Reverse Vesting Order entered by the Ontario Superior Court of Justice. The decision is, by Chief Judge Glenn’s own description, the first detailed opinion in the Second Circuit grappling with a Canadian reverse vesting order (“RVO”) in a Chapter 15 case — and it offers a roadmap for how SDNY will analyze RVOs going forward.

What an RVO Is

An RVO inverts the usual section 363 sale structure. Rather than the debtor selling assets free and clear, the debtor cancels its existing equity, issues new shares to the purchaser, and “vests out” excluded assets, contracts, and liabilities into a newly formed “ResidualCo.” The cleansed entity continues under new ownership, retaining nontransferable permits, licenses, tax attributes, and contractual relationships that an asset sale could not preserve. The structure has become popular in Canadian CCAA proceedings with over 25 RVOs were approved in 2024, a fifty-percent increase from the prior year, though Canadian courts have cautioned that RVOs should not become standard practice.

In Iovate, the debtors held Canadian import and product-sale licenses that could not be transferred. The reverse vesting structure preserved those licenses, retained approximately US $114 million in non-capital losses, and avoided the costs, delay, and execution risk of an asset sale.

The Recognition Framework

Before Iovate, U.S. courts had recognized Canadian RVOs almost exclusively by short orders without published opinions. The only prior published opinion, In re Goli Nutrition Inc. (Bankr. D. Del. 2024), approved an RVO largely because no party objected and cautioned that the order “should not be cited in future motions for the proposition that U.S. courts have unconditionally approved such transactions.” Chief Judge Glenn undertook a full analysis despite the sole objection having been withdrawn.

The analysis rests on section 1521(a)(7), which authorizes “any additional relief that may be available to a trustee” — discretion the court described as “exceedingly broad,” exercised consistent with comity and subject to the public-policy floor of section 1506 and the sufficient-protection requirement of section 1522(a). The court found the RVO met those standards: the Canadian Court determined no stakeholder was worse off; an independent Monitor oversaw the sale process; and no creditor’s claim was extinguished. Having found creditors sufficiently protected under section 1522(a), the court declined to reach the separate question of whether recognition was also appropriate under section 1507.

Why Section 363 Did Not Apply

The court refused to subject the transaction to section 363 review. Section 1520(a)(2) applies section 363 to transfers of a debtor’s property interest within the United States. But neither component triggered the statute. The new-share issuance was not a section 363 “sale”, cancelling existing shares and issuing new ones to a purchaser is not a transfer of property of the debtor. And the Excluded Property transfer would have implicated section 363 only if that property were located in the United States, which the foreign representative represented it would not be. The court nonetheless granted section 363(m) good-faith-purchaser protections as a belt-and-suspenders measure.

Releases After Purdue Pharma

Perhaps the most consequential portion of the opinion addresses the nonconsensual third-party releases. Building on a long line of SDNY decisions enforcing such releases in Chapter 15 (including Metcalfe & Mansfield, Ocean Rig, and Sino-Forest ) and the post-Purdue analyses in Credito Real and Odebrecht, Chief Judge Glenn confirmed that Purdue does not foreclose Chapter 15 recognition of releases ordered by a foreign court. Because Purdue‘s holding rests on the textual structure of section 1123(b), which contains limitations absent from sections 1521 and 1507, those broader Chapter 15 provisions remain available — provided creditors are sufficiently protected under section 1522(a). The Iovate releases were appropriately tailored: limited to claims arising in connection with the Subscription Agreement, the Transaction, and the Reverse Vesting Order, and excluding claims for fraud or willful misconduct.

Takeaway

What makes Iovate valuable is that it does what Goli Nutrition declined to do. It gives practitioners a reasoned, citable framework for recognizing an RVO under section 1521(a)(7). The opinion’s careful walk through the section 363/1520 mechanics, its post-Purdue releases analysis, and its identification of when RVOs are commercially justified, businesses dependent on nontransferable licenses, permits, tax attributes, or contracts, should make Chapter 15 recognition orders cleaner and more predictable going forward.