Creditor Rights Research Articles

NAVIGATING CORPORATE INSOLVENCY: THE CRITICAL ROLE OF RESOLUTION PROFESSIONALS IN PROTECTING CREDIT

This research paper examines the critical role of resolution professionals in protecting creditor interests during corporate insolvency proceedings. The study analyses the legal framework and evaluates the effectiveness of resolution professionals in safeguarding the rights of creditors. The research highlights the challenges faced by resolution professionals and the strategies adopted by them to overcome these challenges. The paper also explores the ethical and professional responsibilities of resolution professionals and their impact on the resolution process. The findings suggest that the success of corporate insolvency proceedings largely depends on the competence and integrity of resolution professionals. The study concludes by providing recommendations for enhancing the role of resolution professionals in protecting creditor interests and improving the overall efficiency of the corporate insolvency framework.

Financial dependence, labour regimes and industry growth: Do creditor rights matter?

Using 3-digit industry data at the state-level during 2009-2018, the paper assesses the impact of the Insolvency and Bankruptcy Code (IBC) on growth across industries with varying degrees of financial dependence. The findings show that IBC positively impacted industry growth, although this occurred by altering the capital-labour mix in favour of the latter. Robustness tests across industry type and state labour regimes support these findings.

Creditor-controlled insolvency and firm financing– Evidence from India

Using the ‘Insolvency and Bankruptcy Code’ (IBC) in India, we show that, despite an increase in the supply of credit, IBC led to a higher reduction in the secured debt of the high tangibility firms compared to the low tangibility firms. We also find that secured debt was substituted with other sources like equity, retained earnings, and accounts payable; more cash was held back. Our findings suggest that managers’ expected cost of bankruptcy obstructed the expected increase in supply of credit after IBC. We add to the mixed evidence on the impact of creditor rights on firm's financing decisions.

KEDUDUKAN KREDITOR SEPARATIS DALAM PROSES KEPAILITAN

The purpose of this study is to find out how the position of separatist creditors in the bankruptcy process is. To answer the problem formulation of the author. The research method used is a normative juridical research method, namely legal research conducted by examining library materials or secondary data. By collecting and then reviewing library materials or secondary data relevant to this research. The results of the research that the provisions in the Law on Guarantees and the Law on Bankruptcy and Debt Payment Delays in which the position of separatist creditors takes precedence over other creditors, and is a separation of creditors' rights, is the author's interpretation of the above discussion, so hereby the author draws conclusions based on the results of the above discussion. . Separatist creditors have the same rights to liquidate assets in the bankruptcy process as if the debtor is not declared bankrupt. However, there are no firm and fast rules between Article 55 paragraph (1) of Law 37/2004 concerning Bankruptcy and Debt Payment Delays and the Civil Code rules regarding the rights of creditors who decide, which can lead to disputes between creditors who decide and practitioners of bankruptcy. In particular Articles 56 and 59 of Law 37/2004 concerning Bankruptcy and Debt Payment Delays. To avoid the above scenario, the bankruptcy practitioner must ensure that the status of the separatist creditor as a lien holder is adequately protected in the settlement of his claim. The transfer of substantive rights by the curator is considered null and void by law, so the provision of Article 56 paragraph (3) of Law 37/2004 concerning Bankruptcy and Debt Payment Delay in the interpretation section needs to be changed. After the substantive rights expire, the guaranteed creditor will compete directly with other creditors

Suspending the Debtor’s Imprisonment in Light of Corona Pandemic: A Study in the Light of the Provisions of Jordanian Legislation and Islamic Sharia

Objectives: The research aims to reconsider the legality of the debtor's imprisonment between the Jordanian legislation and Islamic jurisprudence as a result of stopping the debtor's imprisonment and freezing his criminal prosecution under defense order no. (28/2021) in the event of a debt maturity or writing checks that are not offset by a balance, in order to control the epidemiological situation and take into account the economic conditions associated with COVID-19. Methods: The study adhered to both the descriptive and analytical approaches by reading the defense orders and the pertinent documents, analyzing them, and comparing the rules of positive law and Islamic Sharia. Results: The study found that the current guarantees relating to the seizure of the debtor's assets and barring him from traveling are ineffective at enforcing the creditor's rights, which highlights the need to create new guarantees that are more effective and find new ways to settle disputes between the parties to the debt. It also emphasizes the need to keep the detention procedure in place as an effective way of applying moral pressure to the debtor to repay the debt. Conclusions: The research recommended the need to exploit modern technology and techniques in (preventive protection) through credit disclosure of the status of customers before granting them the debt, and in (post-protection) by finding alternatives to imprisonment due to the inability to implement it currently, such as the application of the electronic bracelet system, which is followed by obligating the debtor to perform work under remote security monitoring.

Bondholder governance, takeover likelihood, and division of gains

We investigate the effect of creditor rights on the probability of becoming a takeover target by constructing firm-level bond covenant indices. Our primary result is that the more restrictive covenants a firm has, the more likely it is to become the target of an acquisition. This finding is robust to the exclusion of merger-related event-risk covenants which have the opposite impact and appear to reduce takeover likelihood. Furthermore, this effect is not driven by financially distressed firms and rather contained in small, profitable, financially healthy firms with high growth opportunities and low cash holdings. We also find that a higher target covenant index leads to a significant decrease (increase) in target (acquirer) abnormal returns around acquisition announcements and tilts merger gains towards the acquirer, suggesting the presence of a ‘covenant discount’ for potential target firms. Overall, our results are consistent with covenants creating key frictions, and in turn, making firms viable targets for acquirers with possibly deep pockets.

Analisa terhadap Praktik Utang Piutang

Qardh is a special contract that is used to hand over assets to other people with an agreement that it must be returned the same as what was borrowed, to other people who can be billed or asked for back or in other words lend without expecting anything in return, for example borrowing money of one hundred thousand rupiahs, then it must be returned with the same. But the reality in society is different, especially in Dusun Dawuhan, Suco Lor Maesan-Bondowoso Village, borrowing money is paid for in coffee, the price of which is determined in an approximate way. In practice, person A (debtor) borrows money from person B (creditor) with an agreement according to the custom of the local hamlet, person A will pay off the money owed with coffee, the price of which is still based on estimates (speculative), for example Rp. 200.000,- per quintal. In fact, when the harvest season comes, the price of one quintal of coffee can go up to Rp. 400,000 and can go down to not even Rp. 200.000,-. Namely Rp. 150.000,- per quintal. The practice of debt receivables like this, contains Gharar, which is prohibited by Syara'. The solution is to prevent gharar buying and selling, which needs to be considered in the contract, namely the clarity of the intentions of each party in the transaction. Therefore, if these debts are used for consumptive purposes, then from the beginning of the contract, it must be clear. For example, if the money from the loan was made to buy coffee, the debtor should explain this. The items described serve as standard. However, that does not preclude free use by the debtor. So, even though the standard item described in the contract is coffee, for example, it is not a problem for the debtor to spend it on other goods. what is certain, the debtor must pay off according to the price of the goods that become the standard in the contract. If this is what is used, then what is actually owed is not money, but coffee. So, what is considered here is the power of the money when it is exchanged for goods. Thus, the debtor must later pay off according to the price of coffee that was made when paying it off. Although this does not rule out the possibility that the goods used as standards experience fluctuations. If it is more expensive, the debtor will pay more. Meanwhile, if it is cheaper, of course the creditor will get less. Thus, the rights of creditors are still protected. He still gets the principal property that he lends according to its value. On the other hand, the debtor has fulfilled his obligations because he has paid according to the standards set.

Creditor rights and real earnings management: Evidence from quasi-natural experiments

This paper exploits the staggered adoption of anti-recharacterization laws across the U.S. states as quasi-natural experiments to study the role of creditor rights in affecting real earnings management. The empirical findings show that strengthening creditor rights significantly increases real earnings management in nonfinancial firms. This effect is more pronounced for firms with higher distress risk and weaker governance. Our findings are robust to a battery of sensitivity checks and reveal increased real earnings management as an unintended consequence of strengthening creditor rights.

Банкротство застройщика как социально-экономический фактор реализации механизма правового регулирования прав участников долевого строительства

The problems of protecting the rights and legitimate interests of participants in shared-equity construction, construction participants and investors arising as part of the of the bankruptcy procedure of the developer are considered. It is noted that there is no concept of a single legal equality of the rights of subject participating in the bankruptcy procedure. It is stated that there are no uniform terminological constructions that allow unambiguously and definitively interpreting the concepts of “participants in shared-equity construction” and “developer of shared construction”, “construction participants”, “developer as a subject of bankrupt legal relations”, taking into account the transformation of a participant in shared-equity construction into a construction participant in the bankruptcy procedure of the developer. The relevance of the research is to assess the changes made in 2018 to the Federal Law of 26.10.2002 No. 127-FZ “On Insolvency (Bankruptcy)” and not received a comprehensive analysis in the doctrine. The practical significance of the study is determined by the analysis of the problems that have arisen in connection with these changes in law enforcement practice in the implementation of legal regulation of the exercise of creditors’ rights arising from the agreement of participation in shared-equity construction, as well as the rights of creditors recognized by the Federal Law “On Insolvency (Bankruptcy)” as construction participants. Other, no less significant issues of the transfer of the rights and obligations of the developer to the acquirer – the public law company “Territorial Development Fund” are also being considered. The purpose of the fund’s activities is to promote the implementation of the state housing policy aimed at increasing guarantees for the protection of the rights and legitimate interests of citizens participating in construction (including participants in shared-equity construction, members of housing cooperatives that have claims for the transfer of residential premises, parking spaces, non–residential premises).

Creditor Rights and Legal Transaction Costs

Creditor Rights and Legal Transaction Costs

Unravelling Complexities in Secured Creditor Rights: Is Exclusive Security a Myth under the Insolvency and Bankruptcy Code.

Unravelling Complexities in Secured Creditor Rights: Is Exclusive Security a Myth under the Insolvency and Bankruptcy Code.

Creditor Rights and Household Debt Renegotiation: Evidence from Unsecured Debt

Creditor Rights and Household Debt Renegotiation: Evidence from Unsecured Debt

Institutional investors and corporate risk at the origin of the international financial crisis

The 2007 financial crisis served as a stark reminder of the vulnerability in the relationship between institutions and companies, as it revealed that many companies collapsed despite government interventions. Two crucial factors that influenced the crisis’s impact on firms were the level of creditor rights protection and corporate risk management. In this study, our aim was to investigate the impact of investment funds and banks on corporate risk prior to the 2007 financial crisis. We conducted an analysis across 21 countries to examine how institutional factors determined the influence of mutual funds and banks on corporate risk, ultimately leading to critical levels of collapse and the global spread of the financial crisis to the real economy. Additionally, we explored the role of mutual funds and banks as reference shareholders. The findings of our study reveal that the process of financial deregulation preceding the 2007 financial crisis contributed to an increase in corporate risk. In other words, financial deregulation facilitated greater involvement of institutional investors in companies, thereby encouraging the adoption of excessively risky and speculative strategies that were not necessarily aligned with the long-term sustainability of firms.

Проблеми оцінки активів у процесі ліквідації банку

The aim of the article is to identify problematic issues of valuation of property (assets) of banks that are in the process of liquidation, and substantiate proposals for the desired solution, taking into account the need to protect the rights of bank creditors. Although the bankruptcy of banks causes significant economic and moral losses, the processes of removing insolvent banks from the market, their reorganization or liquidation are constantly taking place. Therefore, regulators and banks that have been declared insolvent face many questions, including the adequate valuation of banking assets and the determination of the liquidation estate. The article discusses approaches to asset valuation and features of their application in Ukrainian practice, as well as peculiarities of the sale of assets of banks in liquidation according to the Dutch auction model. It is noted that the imperfection of management of banks’ assets in the process of their functioning leads to discrepancies in the valuation of these low-quality assets in the liquidation procedure. It is determined that the ratio between the estimated value of assets and their book value for banks declared insolvent is on average 26.2 %, and the median value is 22.3 % This leads to a number of problems, including the inability of the Deposit Guarantee Fund (DGF) to ensure the repayment of part of the bank’s liabilities, which could be repaid in case of timely acceptance of tender offers at market value. It is noted that the most liquid assets, which are real estate and property, occupy an insignificant share in the structure of the liquidation mass – about 5 %, and the conversion rate in the sale of real estate quite often reaches 200 %. It is proposed, in accordance with European practice, to empower the Fund to monitor the assets of banks in the process of their functioning. The expediency of valuating assets not from the position of doing business «as usual» but from the point of view of the objective need to sell assets, focusing on the quick sale of assets at a market price, is emphasized. In order to improve the process of valuating the assets of an insolvent bank and focusing on the quick and transparent sale of the bank’s assets, it is proposed to implement the international experience of using loss-sharing agreements into domestic practice.

The Re-Narrate the Relevance of Justice in Debtor Protection Related to the Parate Execution Carried Out by Separatist Creditors

The existence of Articles 55 and 56 of Act No. 37 of 2004 concerning Bankruptcy and Suspension of Debt Payment Obligations, the position of debtor protection in the implementation of bankruptcy carried out by separatist creditors against creditors is weak. This is due to the absence of legal remedies that can be taken by debtors during bankruptcy has been found to have happened to him. Therefore, it is necessary to have a disposition of justice in protecting debtors from the rights of separatist creditors. The implementation of bankruptcy as referred to in Article 55 and Article 56 of Act No. 37 of 2004 has not been fair to the debtor, considering that the two articles are only based on the existence of debt from the debtor and are related to the position of solvent or insolvency based on the creditor's view. This is clearly the case because Act No. 37 of 2004 does not adhere to a balance sheet test system where before being declared bankrupt, it is necessary to test the condition of the debtor whether it is really insolvent or actually still solvent. 2) The factors that have resulted in bankruptcy law so far have not been fair to debtors are legal factors, namely in the form of the provisions of Article 55 and Article 56 of Act No. 37 of 2004 which are unfair to debtors. The law even though is widely known that the door to justice in bankruptcy cases is the judge's decision. 3) It is necessary to reconstruct Article 55 and Article 56 of Act No. 37 of 2004. So that the provisions of Article 55 and Article 56 of Act No. 37 of 2004 read: Article 55 of Act No. 37 of 2004: 1) Due to observance of the provisions as referred to in Article 56, Article 57, and Article 58, each Creditor holding a lien, fiduciary guarantee, mortgage, mortgage, or other collateral right, may exercise his rights as if there had been no bankruptcy.

Creditor rights, bank competition, and stability: International evidence

The paper exploits changes in bankruptcy laws in 15 countries to analyze the effect of creditor rights on bank competition and stability. I find that stronger creditor rights in bankruptcy increase bank competition, especially in countries with less stringent restrictions on bank entry and non-traditional bank activities. The increase in bank competition lowers bank stability and counteracts other positive effects of stronger creditor rights on bank stability through higher recovery rates. Empirical analysis controls for changes in creditor rights outside bankruptcy and the results are robust to alternative specifications, alternative sample definitions, and omitted variables and endogeneity controls.

PERLINDUNGAN HUKUM BAGI KREDITUR ATAS SAHAM TANPA WARKAT (SCRIPLESS) SEBAGAI OBJEK JAMINAN GADAI

Scripless shares are one of the objects of collateral as regulated in article 60 section (2) of UUPT. Collateral provides guarantee for repayment of debts to creditors as regulated in article 1150 of the Indonesian civil code. Yet, scripless shares collateral is different from general collateral, where the object of collateral is not on the creditor, and the value of shares changes anytime. This study aims to explain the legal protection for the creditor on scripless shares collateral. Based on findings, the author found that the current regulations have not yet provided maximum legal protection for the creditor in the scripless shares collateral system. KSEI only acts as the depositor of the collateral object and not obliged to guarantee the fulfillment of the creditor’s rights. Thus, when the blocking of collateral shares is lifted, KSEI does not have to ensure that the rights of creditors have been fulfilled. Based on the findings, the author suggests a regulation that obliges KSEI to ensure the creditor’s rights have been fulfilled to be made, before unblocking the collateral objects.

SMEs and dividend payout policy in case of poor legal environment

ABSTRACT This article investigates the dividend informational content hypothesis, showing how managers react to a poor legal environment through positive and credible messages to investors. We analyze private and public limited companies between 2015 and 2019, exploring the relation between their dividend payout policies and the courts’ ability to enforce creditor rights in case of insolvency. Based on our results, we can observe a positive relation between judicial delay and the SMEs’ decisions on dividend payouts, meaning that as the inefficiency of courts increases, small businesses are ever more likely to pay out dividends so that they can send a positive message to the local capital market. On the other hand, our results cannot confirm the same relation for public limited companies, which operate n the global capital market, highlighting the key role of local ties.

Legal Certainty of Actio Pauliana Decision in Bankruptcy Cases

In bankruptcy practice, it is not uncommon for debtors to try to reduce bankruptcy assets by performing legal actions against their bankruptcy assets, resulting in losses for creditors. To protect the rights of Creditors, actio pauliana is an instrument provided by law. For example, in the case of Decision Number 1 / Pdt. Sus - Actio Pauliana / 2018 / PN. Niaga.Mdn Jo Supreme Court Decision Number 89K / Pdt. Sus - Bankruptcy / 2019 / PN. Mdn where the Panel of Judges rejected the Cassation request with the consideration that the evidence submitted could not prove that the bankrupt debtor knew or should have known that the sale and purchase would harm the creditor. However, as a result of the sale and purchase made by the debtor with a third party, the bankruptcy estate was reduced, to the detriment of the creditors. Therefore, the purpose of the research was held to find out and analyze actio puliana can provide legal protection carried out by the curator against creditors, the limitations between good faith debtors and bad faith debtors in transferring part of the bankruptcy property and the application of actio pauliana law by the Panel of Judges. This research uses normative juridical research with a legislative approach, case approach and legal doctrines. The results of the research found that actio pauliana is a form of legal certainty over the rights of creditors in bankruptcy. In the actio pauliana lawsuit, it is necessary to have criteria for good faith debtors and bad faith debtors. If it can be proven that the legal action was carried out in bad faith and is detrimental to the creditors, then the actio pauliana lawsuit is rejected and the decision to reject from the Panel of Judges makes no cancellation of legal actions carried out by the bankrupt debtor.

THE DEPOSIT GUARANTEE FUND OF UKRAINE: TOWARDS EU STANDARDS OF RIGHTS PROTECTION

Abstract An effective deposit insurance system is commonly considered the strongest instrument for increasing confidence in banking systems, as well as for encouraging private investments in banking services. In developing relevant legislation and institutions in line with EU standards, Ukraine will ensure that its deposit guarantee system can be integrated with that of the EU. In light of the relevant legislation, we examine the EU’s deposit guarantee system in general and with regard to its particular characteristics, namely: insured entity, compensation amount, legal terminology, and financing. Then, we compare those characteristics to those of Ukraine and assess the necessity and priority of their development. As a result, we first emphasise that individual entrepreneurs and legal entities, as well as individual entities, must be insured under the Deposit Guarantee Fund. Second, we argue that the current state compensation amount for deposits in case of bank insolvency is insufficient and suggest that it must be revised and increased. Third, we draw attention to the fact that Ukrainian banking and deposit guarantee legislation must be revised and integrated with relevant European legal terminology. Finally, we also analysed the particular aspects of financing for the European deposit guarantee system, especially the various means of investing free funds in the deposit guarantee system, which we thought could be useful to implement in Ukraine. Our results suggest distinct legislative and other empirical measures needed to improve the Ukrainian deposit guarantee system and generally consolidate it with that of the EU. Background: The deposit insurance system provides insurance for the deposits of individuals who have entrusted their money to banks. In the event of the insolvency of a banking institution, the deposit insurance system, to a greater or lesser extent, guarantees the payment of deposits to that institution’s clients and protects the rights of other creditors involved in the insolvency proceedings. As a result of the banking sector crisis in Ukraine during 2014-2017, almost 100 banks were classified as insolvent. Therefore, the Deposit Guarantee Fund of individuals was subject to a huge burden, which exposed several problematic issues related to the protection of depositors’ rights. Methods: To obtain reliable and valid conclusions, the author used comparative and analytical methods of research. These methods consist of the analysis and comparison of the provisions of EU and Ukrainian legislation in the field of the protection of depositors’ rights. Results and Conclusions: The Ukrainian deposit guarantee system has significant differences from the relevant European system. First and foremost, this concerns the amount of guaranteed compensation for deposits in Ukraine. The author concludes that this deposit coverage amount was not reviewed during the period from 2012 to 2022, which does not contribute to the interest of depositors in keeping money in banking institutions. However, on 1 April 2022, during the period of martial law, Ukraine adopted Law No. 2180-IX ‘On Amendments to Certain Laws of Ukraine on Ensuring the Stability of the Deposit Guarantee System for Individuals’, which provides a full guarantee of individuals’ deposits during martial law and three months after its termination, as well as increases the guaranteed deposit compensation to UAH 600,000. These changes will have positive consequences for depositors, but the author points out that in the context of these legislative changes, the state should provide support to the Deposit Guarantee Fund by writing off interest arrears to the Ukrainian Ministry of Finance, which has emerged due to the banking crisis in 2014-2017. In addition, to preserve the liquidity of banks’ assets, the author proposes to ensure that the Fund starts preparing banks for the management of their assets by evaluating and monitoring their status. Furthermore, the author emphasises the need for the harmonisation of the Ukrainian banking legislation with the requirements of Directives 2014/49/EU and 2014/59/EU. For this purpose, the guaranteed amount of reimbursement should be gradually increased to the equivalent of EUR 100,000, and guarantees should be extended to depositors who are legal entities. The relevant legislation must also be amended so that its terminology corresponds with that of the EU, the Deposit Guarantee Fund participants must be included in other credit institutions, and the Deposit Guarantee Fund must guarantee legal entities’ deposits.