Bankruptcy Law Research Articles

Dividend policy adjustments under bankruptcy law: Insights from distressed firms

This paper investigates the impact of the Insolvency and Bankruptcy Code (IBC) on the dividend policy of financially distressed Indian firms. Utilizing a dataset of 33,820 firm-year observations from 2003 to 2023, we employ a difference-in-difference framework to examine how the introduction of IBC influences dividend payouts. Our findings reveal that distressed firms pay more dividends post IBC than non distressed firms, primarily benefiting underlevered distressed firms by enhancing their access to credit. Conversely, overlevered distressed firms experience a reduction in dividend payouts post-IBC. Additionally, the study highlights that standalone distressed firms are more likely to increase dividend payouts post-IBC compared to their business group-affiliated counterparts, due to the latter's access to internal capital markets. These insights contribute to the understanding of how bankruptcy reforms impact the financial strategies of distressed firms and provide valuable implications for policymakers and stakeholders in emerging economies.

The efficiency of bankruptcy proceedings and the severity of insolvency regulations in view of the implementation of the New Opportunity Policy

Abstract The article investigates the relationship between the efficiency of insolvency proceedings, as measured by their duration, and measures the severity of bankruptcy law toward debtors in 27 countries, of which 23 are EU. This objective was achieved using quantitative methods – Pearson’s correlation, pooled panel regression and Granger causality. Research shows no direct correlation between the two variables mentioned above. The increase in sanctions in bankruptcy law contributed to a decrease in the efficiency of insolvency proceedings. In addition, less stringent conditions concerning the time taken to file a bankruptcy petition translated into a shorter duration of insolvency proceedings. Therefore, supporting the New Opportunity Policy, we recommend that regulators focus on softening the legal requirements for filing a bankruptcy petition, for setting a time limit for filing and on reducing the sanctions for honest debtors, including those imposed for failure to file for bankruptcy within the period prescribed by law.

The law politics of bankruptcy decision execution against debtor's assets abroad

The purpose of this study is to examine and analyze law politics related to the execution of bankruptcy decisions against debtor assets abroad. The research method used is normative legal research with a qualitative descriptive analysis method approach, based on comparative law, with prescriptive analytical specifications. The research findings conclude that sovereignty is interpreted as the responsibility to improve and protect all national and international community interests, manifested in the form of the state's ability to interact and establish relations with countries in the world, as well as cooperate and coordinate bilaterally, multilaterally and in international organizations. The provisions on international bankruptcy in Law of the Republic of Indonesia Number 37 of 2004 concerning Bankruptcy and Suspension of Debt Payment Obligations or Undang-Undang Republik Indonesia Nomor 37 Tahun 2004 tentang Kepailitan dan Penundaan Kewajiban Pembayaran Utang (Bankruptcy Law) are similar to the Dutch Bankruptcy Law, there are no comprehensive regulations related to international bankruptcy. To ensure legal certainty, a legal policy is needed in the form of changes and updates to the Bankruptcy Law by adding articles to apply the principles of international bankruptcy in the Model Law, namely the Principle of Access, the Principle of Recognition, the Principle of Assistance and the Principle of Cooperation and Coordination, as applied in the US Bankruptcy Code Chapter 15. Article 299 of the Bankruptcy Law also needs to be amended so that the procedural law applied is the special procedural law for international bankruptcy.

Guest editorial: The interaction between US bankruptcy law and European insolvency Laws (some thoughts on the 45th anniversary of the US bankruptcy code)

Guest editorial: The interaction between <scp>US</scp> bankruptcy law and European insolvency Laws (some thoughts on the 45th anniversary of the <scp>US</scp> bankruptcy code)

Transplanting Absolute Priority in Indian Bankruptcy Law: Part I

In 2016, India revamped its bankruptcy legislation and introduced a new framework for resolution of financially distressed businesses. The Insolvency and Bankruptcy Code (IBC) was intended to usher in a new era of efficiency and galvanize India’s ailing bankruptcy regime. The results thus far have been mixed. One of the issues that has frequently arisen under the new regime is how to distribute the resolution proceeds amongst different classes of creditors. The doctrine evolved by courts and tribunals has been to leave any question on distribution to the discretion of the Committee of Creditors – an approach developed to insulate bankruptcy proceedings from excessive judicial interference. In this paper, which will be published across two volumes, I endeavour to show that this approach is flawed and contributes to the systemic problems afflicting the Indian bankruptcy regime. Drawing on doctrine developed in transnational bankruptcy law, I argue in favour of adopting the absolute priority rule as a fixed rule for distribution of resolution proceeds in India, which can augment value maximization and enable efficient resolution of distressed debt. Part I of this paper will trace the origins, evolution and migration of the absolute priority rule in transnational bankruptcy law. Part II, which will be published in the following volume, will make the case for transplanting absolute priority in Indian bankruptcy law.

Purdue Pharma and the Sackler Family at the Supreme Court

This Viewpoint examines the US Supreme Court’s opinion on Harrington v Purdue Pharma and the implications it could have on public health, individuals affected by opioid misuse, and bankruptcy law.

Taxation in insolvency (bankruptcy) procedures of legal entities

Subject. The article analyzes a set of norms related to the legal regulation of personal income tax, corporate income tax, VAT, and other taxes, as well as the order of their collection (payment) from a bankrupt, depending on its organizational and legal form. The choice of the research object is due to the presence of problems related to ambiguous issues in taxation in bankruptcy proceedings.The purpose of the study. The article attempts to comprehensively analyze the legal support of the current measures regulating the taxation of bankrupt organizations and individuals, current law enforcement practice, and the legal positions of the country's highest courts.Methodology. The leading research method is a formal legal one.Conclusions. The article reveals and concretizes a number of legal problems. The authors argue their own point of view on the taxation of bankrupt organizations and individuals, taking into account the practice of the highest judicial authorities, which, according to the authors.It is concluded that there are grounds to talk about the formation of such a new legal institution of financial law as "public bankruptcy law".

Protection of Workers’ Rights in Bankruptcy Proceeding in Serbian and Western Balkans Legislation

The protection of workers’ rights in bankruptcy proceedings is a matter of supreme importance in every country. Comparing national laws, one could conclude that the predominant solution is to grant workers the position of privileged creditors. In Serbia, workers are protected by means of two laws: the Labour Law, which is the lex generalis for this area, and the Bankruptcy Law, which has the role of lex specialis. In addition to protection during bankruptcy proceedings before commercial courts, workers can appeal to the state’s national guarantee institution, namely, the Solidarity Fund. Serbia is, therefore, among the countries which employ a mixed – protectionist system. By analysing the legal solutions related to these issues, the authors want to determine the correlation between national legal solutions and those at the European Union level, and to consider the problems in bringing these claims in legal practice. They have also reviewed the current legislation in some Western Balkans countries including Croatia as a member of the EU, and Bosnia and Herzegovina, which has candidate status akin to Serbia. The authors conclude that Serbian law has a modern, hybrid approach in securing the rights of workers in bankruptcy proceedings, but that there is room for improving regulations in this area. This could be achieved by, inter alia, increasing the volume of claims guaranteed to workers, restricting the reasons for initiating bankruptcy proceedings, making preliminary payments to workers in the initial stages of the proceedings, and keeping court records on the percentage of workers’ claims being realised in bankruptcy proceedings.

Creditor protection and asset-debt maturity mismatch: a quasi-natural experiment in China

ABSTRACT Recently, the Chinese Government has strengthened the enforcement of bankruptcy laws to protect creditors’ rights. This study shed light on the effect of creditor protection on asset-debt maturity mismatch by employing a quasi-natural experiment in China. The results show that creditor protection mitigates maturity mismatch, and the effect is more pronounced among financially constrained firms. Results remain robust after the dynamic effects test, placebo test, propensity score matching approach, entropy balancing method, and controlling for COVID-19 shocks. Mechanism tests show that creditor protection decreases the cost of debt and reduces over-investment. The effect of creditor protection is pronounced in private companies, financially independent companies, and companies with secured loans. Creditor rights can alleviate maturity mismatch in firms with medium ownership concentration and managerial ownership levels. Economic consequences studies suggest that creditor protection reduces corporate default risk. This study reveals the mechanism and effect of creditor protection on asset-debt maturity mismatch in emerging markets, providing recommendations to policymakers for assessing and improving bankruptcy law regimes.

Институт субсидиарной ответственности в делах о несостоятельности (банкротстве)

This article is devoted to the study of the institution of subsidiary liability in insolvency (bankruptcy) cases with a comparison with the general principles of civil liability in domestic law, identifying similarities and differences taking into account law enforcement and judicial practice. The conclusion is stated that subsidiary liability in bankruptcy law currently has the features of an independent type of liability, for which a corresponding justification is given.

Проблема статуса контролирующего лица как квалифицирующего признака применительно к составу неправомерных действий при банкротстве

Abstract. The article examines the issue of recognizing a person as a controlling debtor through the lens of the prejudicial nature of facts established in arbitration proceedings in bankruptcy cases, with regard to the criminal offense of illegal actions in bankruptcy (Article 195 of the Criminal Code of the Russian Federation). A doctrinal analysis of the provisions of current judicial practice has revealed a discrepancy between bankruptcy law and criminal law approaches to the same legal category – the status of a controlling person of the debtor. Since, in the context of criminal law, the status of a controlling person may lead to more severe liability, bankruptcy presumptions, such as the presumption of the status of a controlling person due to the receipt of benefits, cannot be applied in criminal law regulation. This is due to the fact that, according to the systematic interpretation of the provisions of the Criminal Code, the strengthening of the responsibility of the controlling person is conditioned by the hypothetical possibility of real disposal of the debtor’s property, which is not always the case with bankruptcy presumptions.

Sharia Economic Bankruptcy Law (al-Taflis) and the Dualism of Court Competency in Indonesia

Since Religious Court Law was amended by Law No. 3 of 2006, every sharia economic case is stipulated as the competency of the Religious Court. Conversely, Bankruptcy Law No. 37 of 2004 has never been synchronized with the amended Religious Courts Law. Therefore, the competent court does not handle sharia economic bankruptcy (al-taflis) cases. This study aims to ensure that al-taflis can be examined based on sharia economic principles by the most appropriate judicial forum. It is normative legal research using primary and secondary legal materials such as court decisions, statutory, books, journals, reports, and internet sources, then analyzing and synchronizing to get an ideal formula regarding how al-taflis cases are settled in court. The result shows that al-taflis is appropriately stipulated as the absolute competence of Religious Courts. Case studies of al-taflis court decisions settled by the Commercial Court so far, also indicate that sharia principles are not sufficiently considered in the decisions, even ignored. Therefore, it is urgent to make synchronization efforts by amending the Bankruptcy Law until it can accommodate the settlement of al-taflis case through Religious Courts. Otherwise, it will be only a utopian sharia economic bankruptcy law

Конкуренция требований налогового органа и конкурсных кредиторов к взаимозависимому с несостоятельным налогоплательщиком лицу

The article deals with the situation of competition in the practice of arbitration courts of the tax authority's claim for the recovery of arrears, presented simultaneously to the person controlling the debtor in a separate dispute on bringing to subsidiary liability in a bankruptcy case of a taxpayer in the manner of Chapter 3.2. of the Bankruptcy Law, and claims against the same person as an interdependent with an insolvent taxpayer in a separate claim proceeding, on the basis of paragraph 1, paragraph 3, Article 45 of the Tax Code of the Russian Federation. The author believes that in the situation under consideration there is an identity of claims, as a result of which the rights of other creditors of the debtor who are not involved in the distribution of funds received by the tax authority from the controlling debtor bypassing the competitive procedure are violated.

Bankruptcy reforms and corporate debt structure

A growing number of jurisdictions have adopted bankruptcy law reforms to facilitate debt restructuring. Using a difference-in-differences model based on bankruptcy law reforms in six economically advanced jurisdictions, we discover that firms adopt more diversified debt instruments following the reforms. Importantly, firms that are more vulnerable to a tightening of credit supply are more adversely affected by the legal changes, and they also decrease overall debt borrowing and investment. Moreover, firms affected by the reforms use secured debt less frequently, aligning with the idea that these legal changes diminish the protection afforded to secured creditors. In addition, borrowing costs rise after the reforms, implying that creditors may adjust the terms of debt contracts to counterbalance the decreased legal protection.

Кредиторское оспаривание взаимосвязанных сделок как средство восстановления баланса интересов

The combination of internally related volitional actions and their consequences “reveals” the real common cause of transactions, and therefore interconnected transactions are subject to “reconstruction” into a single transaction. Such a single transaction can be verified for any element of invalidity provided for by Chapter III.1 of the Bankruptcy Law or in relation to articles 10 and 168 of the Civil Code of the Russian Federation. The basis of bankruptcy reconstruction as a legal means of restoring the balance of interests is the idea of establishing a connection (according to the model of a necessary condition) between various actions (transactions) and their actual impact on the bankruptcy estate on the basis of a procedural assessment of various facts and their subsequent legal qualification as a single tort.

Bankruptcy law enforcement and corporate digital transformation: evidence from a quasi-natural experiment in China

ABSTRACT Digital transformation presents both opportunities and challenges for companies. However, there is little literature that investigates external factors affecting corporate digital transformation. This paper explores the impact of bankruptcy law enforcement on corporate digital transformation, using the introduction of bankruptcy courts in China as a quasi-natural experiment. Using the 2010–2019 data of Chinese A-share listed companies, we find that bankruptcy courts significantly increase digital transformation by 17.5%. The effects are driven by increased debt financing and reallocation of digital talent, and are more pronounced for firms reliant on external financing and in cities with more zombie firms. Our study highlights the importance of legal institutions in supporting digital initiatives and offers insights for policymakers and managers to drive digitalization. Future research could expand to SMEs and other influencing factors.

Common Provisions between Preventive Measures and Bankruptcy Declaration in Kuwaiti Law (71/2020): A Comparative Study with Islamic Jurisprudence

Objectives: This study examines the key provisions common to preventive measures against bankruptcy (preventive settlement and restructuring) and the declaration of bankruptcy in the Kuwaiti Bankruptcy Law (71/2020), comparing them with Islamic jurisprudence. Such is particularly relevant as many of these provisions received no treatment in the repealed articles (555-800) of the Commercial Law (68/80) or other Arab legislations, such as the Egyptian Law of Protective Reconciliation and Restructuring and Bankruptcy Declaration (11/2018). Methodology: This study employs three methodologies: an inductive approach to collecting legal and jurisprudential material, a deductive approach to the provisions under investigation, and a comparative approach to these provisions and Islamic jurisprudence. Findings: The study concludes that many of the shared provisions in the law are consistent with Islamic jurisprudence, while others differ. The application of these provisions may vary depending on the debtor's situation, whether they are bankrupt with debts exceeding assets or facing financial difficulties without entering bankruptcy. Originality: This study is the first jurisprudential analysis of the shared provisions between bankruptcy and its preventive measures in Kuwaiti Bankruptcy Law. The study includes several recommendations for aligning the provisions of this law with Islamic jurisprudence.

REFLECTIONS ON MITIGATION OF RISKS IN ADMINISTRATIVE CONTRACTS IN THE FACE OF PUBLIC CALAMITY SITUATIONS AND THE INSTITUTE OF LEGAL RECOVERY

This article aims to reflect on the impact of the COVID-19 pandemic on Brazilian public contractual relations, focusing on the following aspects: i) the institute of judicial recovery, as a legal instrument to assist institutions that were unable to recover the financial crisis; ii) government risk management mechanisms that mitigate the impact of such events on the management of public accounts. In this sense, at the same time, it points out the business difficulties left by the pandemic and their relationship with the legislation currently in force, with the main focus being the Judicial Recovery and Bankruptcy law and the Strategic Management of Government Risks. Qualitative research methods were used, based on the documentary data collection instrument and data processing: content analysis. The research results indicate the need to change the legislation in question, in order to enable the judicial recovery mechanism to be improved and integrity and risk management practices to be better developed in the strategic management of the public sector.

Pattern of Care for the Bankruptcy Trustee: Is Transplantation to Indonesian Law Possible for SDGs?

Purpose: The centrality of the bankruptcy trustee in bankruptcy cases requires bankruptcy law to maintain and enforce the trustee's standard of care. In the United States, the formulation of this standard at least includes the form of liability, level of violation, and exceptions to the trustee's liability. In Indonesia, this standard does not yet exist, so the legal certainty is still questionable. Indeed, there is general provision in Article 1365 of the Indonesia Civil Code and special provision in Article 72 of the Indonesia Bankruptcy Act 2004, but they are considered ineffective. Efforts are needed to borrow this standard from the United States. The most appropriate way of convergence is to carry out legal transplant. Therefore, this article discusses this standard in the United States, describes the text and legal context in Indonesia, and ultimately reveals transplant with the concept of path dependence. Method: The research conducted is normative legal research, so that discussions are carried out on the legal principles of liability, violations, and exceptions; in addition to discussions on comparative laws that exist in the United States. Given that the focus is only on legal materials (secondary data), the research is purely doctrinal research. With document study all results are collected, which are then subjected to quantitative analysis. Results: Research was conducted on the legal history of bankruptcy, namely the legal system (sources, institutions, and legal procedures) and legal culture (compliance, justice, and dispute resolution). There are indeed similarities in institutions and legal procedures that apply to both countries, although there is differentiation in the sources of law for the application of standard. In addition, there is a fairly high discrepancy between the two countries regarding compliance and justice experienced by the community, in addition to the differences in the main mode of court in the eyes of the community.

Prinsip Sistemik Lembaga Perdamaian PKPU Untuk Mencapai Nilai Keadilan

Systemic principles serve as the basic basis for thought and action processes, representing interconnected elements that contribute to the formation of a comprehensive whole. Bankruptcy law is a special and special law, regulated in Articles 222 to 294 of the Bankruptcy Law and PPU, PKPU is a legal peace institution whose operational elements include deciding judges, administrators, supervisory judges, debtors, creditors, and additional elements in the PKPU institution that are guarantors if provided. Systemically, these elements are interrelated both within their own elements and with theoretical elements, namely the Ideal elements (about meaning) and the actual elements. According to Article 287 of the Bankruptcy Law and PKPU Jo Article 282 of the Bankruptcy Law and PKPU, PKPU has a final and binding decision, but it is limited, and its decision is only related to the minutes of the meeting. The verdict still has legal consequences if violated. The author’s motivation is to analyze systemic principles in the legal framework of PKPU peace institutions with the aim of upholding the principle of justice. The analysis methodology used is the legal system theory developed by Kees Schuit, focusing on the Ideal, Operational, and Actual elements. In addition, it incorporates three basic principles outlined by Gustav Radbruch – Certainty, Benefit, and Justice. The results of this study contribute prescriptive value to the field of law, especially in bankruptcy law.