Transaction avoidance is part of insolvency proceedings. The successful application of the rules on transaction avoidance allows the value of the debtor’s assets to be maximised, and thus increases ...the satisfaction of creditors’ claims. In the European Union, the substantive rules on insolvency law still are a matter of the national laws of Member States. However, trends in the policy-making actions of the European Union reveal that various initiatives have been proposed to establish certain rules on transaction avoidance which should increase recovery rates for creditors and contribute to the proper functioning of the domestic market. This article focuses on the general aims of transaction avoidance and provides a critical assessment of the proposed harmonisation of the rules on transaction avoidance in European Union law. The authors found that the proposed rules on the harmonisation of transaction avoidance rules in European Union insolvency law may actually discourage businesses regarding the exercise of the freedom of establishment, and may also intervene in the substantive insolvency and civil law regulations of Member States.
The purpose of this book is to provide a coherent overview of the insolvency systems found around the world. Its intended audience includes academics, judges, lawyers, and policymakers. Its focus is ...on businesses rather than natural persons. The authors hope to give the reader a sense of some of the principal approaches to managing the general default of a business debtor. The authors will discuss the nature of the costs and benefits arising from the various policy choices legislators have made. In the process, they will emphasize the close interrelationship among various elements of an insolvency regime so that these elements can be viewed as part of an overall system and not just as a series of policy decisions about particular rules, such as the method of initiation of an insolvency case or the balance struck in setting the boundaries of an avoidance power. The organization of the book reflects our view of insolvency laws as complete systems, including not only the 'insolvency' or 'bankruptcy' code of a jurisdiction but also closely related laws and the institutional framework in which those laws are applied. The book takes a systematic approach to a variety of topics related to credit and insolvency regulation. The functional analysis starts with the study of debt enforcement, continues with an examination of general corporate insolvency legislation, corporate rehabilitation proceedings, informal workouts, employee rights, judicial and administrative institutions, and the considerations key to cross-border insolvency proceedings.
Abstract
The interface between securitization law and insolvency law is the central legal concern in designing securitization transactions. The complex structure of these transactions under the ...Securitization Act of 2004 should be understood within a specific legal context: the possible bankruptcy, insolvency, or liquidation of the “originator” (i.e. the entity requiring securitization financing), which may jeopardize the claims of asset-backed security investors. It is a solution to the risk that security holders with claim to specific assets may end up being subordinated to the interest of preferred creditors and ranked pari passu with, or even lower than, unsecured creditors in a rehabilitation or liquidation proceeding. Under present law, this risk may arise through the “substantive consolidation” and “clawback” provisions of the Financial Rehabilitation and Insolvency Act (FRIA) of 2010. This risk is mitigated through the creation of a bankruptcy remote vehicle and true sale of receivables, and it is the lawyer’s principal role in the securitization process to isolate or ring-fence assets beyond the reach of creditors, and making them an exclusive claim of investors. How this works in theory and practice is the subject of this paper.
COVID-19 placed a special role on fiscal policy in rescuing companies short of liquidity from insolvency. In the first months of the crisis, SMEs as the backbone of Germany's economy benefited from ...large and mainly indiscriminate aid measures. Avoiding business failures in a whatever-it-takes fashion contrasts, however, with the cleansing mechanism of economic crises: a mechanism which forces unviable firms out of the market, thereby reallocating resources efficiently. By focusing on firms' pre-crisis financial standing, we estimate the extent to which the policy response induced an insolvency gap and analyze whether the gap is characterized by firms which were already struggling before the pandemic. With the policy measures being focused on smaller firms, we also examine whether this insolvency gap differs with respect to firm size. Our results show that the COVID-19 policy response in Germany has triggered a backlog of insolvencies that is particularly pronounced among financially weak, small firms, having potential long-term implications on entrepreneurship and economic recovery. Plain English Summary This study analyzes the extent to which the strong policy support to companies in the early phase of the COVID-19 crisis has prevented a large wave of corporate insolvencies. Using data of about 1.5 million German companies, it is shown that it was mainly smaller firms that experienced strong financial distress and would have gone bankrupt without policy assistance. In times of crises, insolvencies usually allow for a reallocation of employees and capital to more efficient firms. However, the analysis reveals that this 'cleansing effect' is hampered in the current crisis as the largely indiscriminate granting of liquidity subsidies and the temporary suspension of the duty to file for insolvency have caused an insolvency gap that is driven by firms which were already in a weak financial position before the crisis. Overall, the insolvency gap is estimated to affect around 25,000 companies, a substantial number compared to the around 16,300 actual insolvencies in 2020. In the ongoing crisis, policy makers should prefer instruments favoring entrepreneurs who respond innovatively to the pandemic instead of prolonging the survival of near-insolvent firms.
The responsibility training of the persons responsible for the insolvency of a debtor company is one of the mechanisms typical of the insolvency procedure, whereby creditors can recover the amounts ...owed to them. This is entailed by the violation of some legal norms in force, through an illegal deed, which requires the guilty person to bear the effects of this conduct. The liability of guilty persons is a special tortious civil liability that takes over the conditions of the civil liability for one's own deed, respectively: the existence of a prejudice, the commission of an illicit deed, the existence of guilt and the establishment of a causal connection between the illicit deed and the damage. The jurisprudence has raised the issue of the compatibility of this action with the request for a guarantee from those persons to whom the concrete exercise of the attributions has been delegated, by the statutory administrator of the debtor company. The purpose of this analysis consists in presenting the novelties to the regulation of the insolvency law incurring civil liability towards the administrator of the insolvent company.
Economic shocks create insolvency law-making space, generating opportunities for legal reform that may be absent in good times. Policymakers may suddenly acquire a mandate to resource institutions or ...drive through a change in the law where in good times such reforms were likely to be foiled by interest group capture, or simply unlikely to get sufficient political traction. A crisis, then, is an opportunity for the well-prepared insolvency policymaker. Insolvency rule-making in crisis conditions is, however, plainly also risky. Making best use of the opportunity implies making more than temporary changes to the regime. But design choices made mid-crisis will almost inevitably be influenced by the features of the crisis itself, generating a risk that the result of the reform effort will be distorted law, ill-suited to the achievement of the lawmaker’s objectives in the long run. This paper considers the permanent restructuring law reforms enacted in the UK during the first wave of the Covid-19 pandemic. At first glance, these reforms appear to exemplify the case of the well-prepared policymaker, poised to drive through carefully planned changes to the law when the opportunity arises. On closer inspection, however, a different picture emerges. The permanent measures, which were enacted in a fast-track legislative process, departed from the Government’s pre-pandemic plan in material and undesirable ways. In some cases, these deviations mean that the original objective has not been achieved at all; in others, the objective has been at least partially achieved, but at unnecessary cost. Overall, the UK experience appears to better exemplify the risks of attempting insolvency law reform in a crisis, than the opportunities that a crisis affords to an insolvency policymaker.
Purpose The purpose of the paper is to analyze the new Bankruptcy Law in Saudi Arabia (KSA Bankruptcy Law) under both a comparative lens and a policy-oriented one, while highlighting some of the most ...essential operational steps and procedures in a bankruptcy proceeding under the law. Design/methodology/approach The approach adopted analyzes the specific mechanics and procedures of a bankruptcy law under the general policies and goals of bankruptcy. Additionally, where appropriate, a brief comparison to the US Bankruptcy code and its provisions is presented to provide an alternative approach on how similar issues are handled under a reputable and proven bankruptcy system. Findings Overall, the KSA Bankruptcy Law is a major accomplishment and advancement to the Kingdom’s insolvency regime. The law consolidated and codified the laws governing bankruptcy under the Kingdom’s prior regime, and followed the structure of a modern bankruptcy regime. In doing so, several of the law’s policies and objectives have been fulfilled by providing an effective, predictable and reliable bankruptcy system. Originality/value Given the relatively recent adoption of the KSA Bankruptcy Law, the paper provides a comprehensive assessment of the law’s operation and its effectiveness in achieving its policy goals as a modern bankruptcy law.
This article presents a comprehensive review of China's recent market-oriented Debt-to-Equity Swap (DES) programme, a strategy developed to alleviate financial distress in companies and reduce the ...country's overall debt. The effectiveness of the programme in China remains a subject of debate, with particular concerns about government interference. This study uncovers that, while China's DES transactions show signs of becoming more 'market-oriented', the evolution is hindered by the current legal and financial institutions. The findings of this study reinforce the 'law and finance' theory, emphasising the crucial function of sound legal systems in enabling private bargains and promoting financial development and economic growth. To facilitate truly market-oriented DES and efficient corporate restructuring, the study underscores the need for China to foster reforms in legal and financial institutions. Key recommendations include promoting fairness in formal reorganisation, developing a separate restructuring framework, and exploring effective valuation methods.
This article analyzes the problems of ensuring the effectiveness of restructuring proceedings when implementing the Restructuring and Insolvency Directive into the law of the Republic of Lithuania. ...It examines the economic, social, and legal objectives of restructuring proceedings, and how this process can preserve viable companies operating in the market which encounter issues of solvency. The goals of the Restructuring and Insolvency Directive and the need to harmonize restructuring proceedings in the European Union are also assessed. This article additionally focuses on analyzing elements of ensuring the effectiveness of the restructuring proceedings set out in the Restructuring and Insolvency Directive: essential contracts, new and interim financing, suspension of individual enforcement measures, and the confirmation of a restructuring plan. It analyzes how these elements of the restructuring proceedings can help to ensure the preservation of viable companies and the continuity of activities during restructuring proceedings. Finally, this article also examines the proposed amendments to the Law on the Insolvency of Legal Entities regarding the implementation of the Restructuring and Insolvency Directive, and considers whether the proposed amendments will increase the efficiency of restructuring proceedings.
Este trabajo tiene como objeto el estudio somero del status quaestionis y de propuestas de lege lata y, sobre todo, de lege ferenda del derecho internacional privado de la insolvencia de la República ...Argentina y del Mercosur a la luz de la actividad legisferante de organismos internacionales, entidades no gubernamentales, y entidades científicas y profesionales en el área del derecho concursal internacional en los últimos 30 años. Este trabajo hace eco de las iniciativas elaboradas por instituciones como el Banco Mundial, el Fondo Monetario Internacional, Insol International, Insol Europe, el International Insolvency Institute, el American Bankruptcy Institute, el American Law Institute, la International Bar Association, y de normas vigentes como el Reglamento Europeo sobre Insolvencia de los años 2000 y 2015. El autor propone en este trabajo la adopción de normas como el Anteproyecto argentino del año 2002 sobre insolvencia transfronteriza, con algunas modificaciones y agregados, inspirado en la Ley Modelo sobre Insolvencia Transfronteriza de UNCITRAL de 1997.
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