A. Types of Indian Business Entities
In order to understand the uncertainty and resultant problems created by the Bankruptcy Code, one must first understand that there are three different types of actors in the Indian business community. First, there is the tribe itself. Second, there are tribal businesses. These are corporations created by the tribe both to provide necessary services and to spur economic development. These businesses are subordinate to the tribe, but, unlike most types of government services, can be run for profit. Finally, there are businesses unaffiliated with the tribe that are owned by private, individual tribal members.
No one disputes that individual members of the tribe who own private businesses may file for bankruptcy. Rather, the uncertainty surrounding Indian entities in the Bankruptcy Code pertains to Indian tribes as a whole, as well as to the businesses these tribes charter. Because businesses chartered by tribes are responsible for substantial revenue generated by tribes, the uncertainty can have significant ramifications for Indian businesses.
Under the Indian Reorganization Act of 1934, the Secretary of the Interior can issue a charter of incorporation to a tribe allowing the tribe to form corporate entities and conduct business:
The Secretary of the Interior may, upon petition by any tribe, issue a charter of incorporation to such tribe .... Such charter may convey to the incorporated tribe the power to purchase, take by gift, or bequest, or otherwise, own, hold, manage, operate, and dispose of property of every description, real and personal, including the power to purchase restricted Indian lands and to issue in exchange therefore interests in corporate property, and such further powers as may be incidental to the conduct of business, not inconsistent with law ....
These tribal entities are known as Section 17 corporations. In interpreting the statute, the Sixth Circuit Court of Appeals has held that the language of Section 17 itself--by calling the entity an incorporated tribe'--suggests that the entity is an arm of the tribe. Therefore, if a tribe is unable to file for bankruptcy, it is unclear under what theory a tribally chartered business could file for bankruptcy given that the business is still part of the tribe. It is the general view that if tribes cannot file for bankruptcy, then neither can their businesses.
