Restructuring Law Research Articles

The New Luxembourg Insolvency and Restructuring Law in Light of the Transposition of the Directive (EU) 2019/1023

The transposition of the Directive (EU) 2019/1023 by the Law of 7 August 2023 has provided an opportunity to update Luxembourg’s insolvency and restructuring law, addressing aspects such as insolvency prevention, debt and business restructuring, the second chance for honest insolvent entrepreneurs, and the effectiveness of insolvency proceedings. New proceedings, new practitioners and new mechanisms have been introduced into Luxembourg law. While the new rules require adaptation and may be subject to discussion on certain points, the transposition of the Directive (EU) 2019/1023 aligns Luxembourg law with European standards in the realm of restructuring and insolvency. Consequently, this move enhances its competitiveness.

Moratorium As a Crucial Component of Corporate Restructuring Under Saudi Bankruptcy Law

Abstract The moratorium or automatic stay is a fundamental component of corporate restructuring procedures. It provides the distressed company with a brief respite from its creditors by temporarily barring all collection efforts and all proceedings against the company and its assets. By temporarily barring such actions, the moratorium provides the company with time during which it can negotiate with its creditors and formulate a proper restructuring plan. The purpose of this article is to examine the efficacy of moratorium under the Saudi restructuring law in light of the UK and the US experiences. The article is principally concerned with two key issues: the scope of the moratorium and the circumstances under which relief from a moratorium may be granted.

A theory of relativity in restructuring developed with the Coase Theorem

AbstractThis article addresses a key topic in restructuring law, namely the alternative legislative rules for setting priorities for payments and rights among stakeholders in a statutory restructuring programme. The EU Member States have now implemented the Restructuring Directive (2019/1023), which gives two options for the priority rules and the outcomes of the new laws seem to vary significantly. As this legislation is important also for the efficiency of the capital markets, it is good to investigate the potential impacts the new legislative structures may bring for the process. In the article the author argues, by using the Coase Theorem, a leading theory in law and economics, that wider powers for a court to consider the interests of all parties in restructuring could be a preferable legislative solution to restructuring law. It would protect generally the creation of a restructuring surplus, as an individual class would be unable to use its rights as a tool for gaining further benefits. Relativity would stimulate the bargaining of property rights in the process and would follow the Coase Theorem, according to which bargaining between individuals or groups related to property rights will lead to an optimal and efficient outcome.

Mid-Crisis Restructuring Law Reform in the United Kingdom

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.

The Pandemic as a Chance to Modernise Italian Insolvency and Restructuring Law

The Pandemic as a Chance to Modernise Italian Insolvency and Restructuring Law

Bankruptcy And Restructuring of Entrepreneurs As Instruments Protecting The Creditor and Debtor In Poland

The economic and political changes that took place in Poland after 1989, and in particular the transition from a planned economy system to a free market, caused a revival of these legal regulations, which before 1989 were of little importance. These areas include, in particular, bankruptcy and restructuring law. It lays down rules for the removal or restructuring of market participants who, for reasons attributable or not, have become insolvent.

Mid-Crisis Restructuring Law Reform in the United Kingdom

Mid-Crisis Restructuring Law Reform in the United Kingdom

Selective Corporate Restructuring Strategy

This article engages with a fundamental, but under‐theorised, fact: that modern UK and US corporate restructuring plans frequently impair only selected creditors, and frequently treat impaired creditors of equal rank differently. It starts from the premise that selectivity and differential treatment, while often justifiable, raise normative questions about the boundaries within which they ought to be permitted. It then reviews selective and differential strategies in three UK restructuring procedures, using US chapter 11 as a comparator. The core contention is that selectivity and differentiation are best regulated by the threat of independent review against a menu of relevant criteria. A menu of criteria is developed, designed to distinguish legitimate and illegitimate uses of selective and/or differential strategies, and these criteria are mapped onto the various UK restructuring law procedures and US chapter 11. The article concludes with some limited suggestions for reform directed mainly at the UK company voluntary arrangement.

The Position of an Equity Holder in the Company’s Restructuring Proceedings Under the Polish Restructuring Law and the Directive on Preventive Restructuring

The obligation to transpose the Preventive Restructuring Directive encourages discussion on the position of an equity holder in the company’s restructuring proceedings. The assumptions of the Polish restructuring procedure do not ipso jure grant equity holders the status of a participant in the proceedings. The Directive recognizes the risk of gross prejudice to the rights of equity holders, entitling the EU Member States to grant them the status of participants in the proceedings. Currently, equity holders’ mute position means that they are not able to effectively oppose restructuring actions that are to the detriment of their share rights, especially when creditors seek a hostile takeover of the company. De lege lata, the restructuring law gives equity holders almost no defense tools against a hostile takeover of the company as part of the debt-for-equity conversion.

Corporate Reorganisation Law and the Shaping Powers of Market Realities and Doctrinal Concepts

Abstract In Corporate Reorganization Law and Forces of Change, Sarah Paterson investigates the development of modern corporate reorganisation law in the United States and England and shows how, and why, the use of these laws has changed over time. Paterson argues that any analysis of corporate restructuring law must focus on the participants in the process and the way they mobilise and adapt legal rules in new ways to meet the problem of the day. She concludes that best practice, not doctrinal concepts, should inform any law reform in this area. This review concludes nonetheless with an attempt to identify a doctrinal concept of a modern restructuring law based on the insights of Paterson’s socio-legal analysis.

Legal and economic determinants of restructuring processes in health care entities in Poland

Motivation: The majority of problems in the health care system originate in the limited financial resources, but the efficiency of the system is also — indirectly — affected by the management of these resources, which is sometimes not as effective as it might be. These problems become particularly apparent in the Polish public health care, undergoing constant reforms. This brings into focus the issue relating to restructuring processes, which are determined by relevant legal regulations and the competences of people in charge, who need to maintain the consistency of implementation.
 Aim: The article aims to analyse legal and economic determinants in the restructuring of health care entities in Poland, with particular emphasis on the possible application of restructuring proceedings to these entities. Further, it identifies key success factors for restructuring processes from the perspective of management. The following legal acts were included in the analysis: the Act of 15 May 2015 the Restructuring Law, the Act of 15 April 2011 on medical activity, the Act of 23 April 1964 the Civil Code, the Act of 28 February 2003 the Bankruptcy Law. The review of good management practices in the research area was presented.
 Results: Based on the analysis, recommendations concerning the implementation of restructuring processes in health care entities were formulated. The benefits stemming from the application of restructuring proceedings to health care entities were discussed. The key elements of the restructuring plan, accompanied with practical guidelines, were presented.

Legal Transplantation of Corporate Restructuring Law and Mitigating the Hold-out Problems

Legal Transplantation of Corporate Restructuring Law and Mitigating the Hold-out Problems

Ponadczasowość regulacji prawnych dotyczących niewypłacalności

The study describes the legal regulations concerning insolvency in the period of the Second Polish Republic. The political system of the Republic of Poland in the years 1926–1935 is described as authoritarian in order to distinguish it from the total fascist system.
 The difficult economic and financial situation of the Polish state during the post-partition period required state interference in introducing legal regulations ensuring protection of creditors, while taking into account the rights of debtors who became insolvent for no fault of their own. Bankruptcy became a society-wide problem, albeit of varying severity. The study describes legal regulations concerning insolvency, which are included both in the Ordinance of the President of the Republic of Poland of 24 October 1934, the Law on Settlement Proceedings (Journal of Laws of 1934, No. 93, item 836, with binding force from 1 January 1935), and in the Ordinance of the President of the Republic of Poland of 24 October 1934, the Bankruptcy Law (Journal of Laws of 1934, No. 93, item 834, with binding force from 1 January 1935). The above-mentioned legal acts contained regulations adjusted to the state of insolvency, which is the result of the debtor’s difficult economic and financial situation. The state of the debtor’s insolvency or the threat of insolvency determined whether it was possible to conduct a procedure in which the debtor entered into an arrangement with creditors or whether the debtor should be declared bankrupt.
 In the case of bankruptcy, a trustee appointed by the bankruptcy court managed the assets of the bankrupt, constituting the bankruptcy estate, and the bankrupt was deprived of the right to manage their assets. The main purpose of bankruptcy proceedings was to sell the assets included in the bankruptcy estate and to achieve equal satisfaction of creditors of the bankrupt debtor. The course of these proceedings was different and depended on whether it was possible to make an arrangement with the creditors or whether it was necessary to implement procedures related to the liquidation of the bankrupt debtor’s assets. Although both legal acts were enacted in the interwar period, they were in force until the entry into force of the Act of 28 February 2003, the Bankruptcy and Reorganization Law (Journal of Laws of 2003, No. 60, item 535), that is, for almost 60 years. Therefore, regardless of the changes in the political system of the Polish state, the insolvency regulations from the authoritarian period in the Second Republic remained in force for many decades. The timelessness of these regulations is confirmed by the fact that some of the legal regulations that were enacted in 1934 are still applied today, although they have been partially modified and adapted to the current economic situation. The entry into force on 1 January 2016 of the Law of 15 May 2018 on Restructuring Law (Journal of Laws of 2015, item 978) resulted in a return to the separation of legal regulations that can be implemented depending on the debtor’s difficult financial situation. The Restructuring Law currently regulates the proceedings enabling an insolvent debtor or a debtor at risk of insolvency to enter into an arrangement with creditors, the effects of an arrangement as well as the conduct of the rehabilitation proceedings. The purpose of the various types of restructuring proceedings is to avoid declaring bankruptcy. On the other hand, the Bankruptcy Law, similarly to the period of the Second Polish Republic, regulates the procedure, the main purpose of which is to achieve equal satisfaction of the creditors of the debtor in the bankruptcy to the highest possible extent, and only if rational considerations allow the debtor’s current enterprise to be retained.

The legal restructuring framework in Poland: Does it help indebted enterprises avoid bankruptcy?

AbstractThe purpose of the article is to present the latest research regarding the usefulness of restructuring proceedings in Poland, which enterprises threatened with insolvency or already insolvent may use to avoid bankruptcy. Changes in the legal system in Poland in 2015 were ground‐breaking, as not only the bankruptcy law was amended, but also the legal system was enriched with a new Restructuring Law (in force from 2016). The contribution of this article is threefold. First, the specifics of the four types of restructuring proceedings and the main actions to be carried out during the proceedings are discussed. Second, an analysis of the phenomenon of enterprise restructuring in Poland has been conducted on the basis of statistical data published by the Ministry of Justice. Third, the effects of 533 restructuring proceedings opened against capital companies in the period 2016–2018 have been assessed. The results achieved have allowed for the formulation of initial conclusions on the usefulness of the legal debt restructuring framework in Poland for business entities experiencing temporary financial difficulties.

The effects of the assignment of future rent claims by the entity against which the restructuring proceedings were subsequently opened

In the theory of law and the jurisprudence of courts, there is a dispute as to when and in whose property there is a disputable effect of making the assignment of future rent claims. Three concepts presented by theoreticians of civil law lead to different legal consequences. The practical importance of the above dispute has far-reaching effects under the restructuring law in the event that the restructuring proceedings were subsequently opened against the assignor. From the perspective of Polish private law, the theory of the pass-through acquisition of claims is more convincing, what in the event of the subsequent opening of restructuring proceedings against the assignor, that the claims arising after the arrangement date are included in the arrangement/remedial estate. The adoption of a different concept may justify the examination of the assignment of future claims from the perspective of ineffectiveness against the arrangement/remedial estate.

Corporate Restructuring Versus Financial Resolution: Benchmarks for the Lawful Treatment of Creditors and Shareholders

The paper explores the degree to which the recent European law of corporate restructuring may influence distributional decisions in financial resolution. Two fundamental issues arise: the minimum standard of protection for creditors and shareholders, and their treatment beyond this minimum standard.As to the first issue, the minimum distribution to these parties is based on their hypothetical treatment in a counterfactual. It is examined whether the liquidationbased counterfactual in resolution may be influenced by the concept of “next-bestalternative” in corporate restructuring.As to the second issue, while financial resolution allocates losses using a rather strict waterfall, corporate restructuring law may accommodate some broader flexibility, in particular if the novel relative priority rule is adopted. This degree of flexibility does not apply to financial resolution. But a certain parallel could be drawn between discretionary exclusions from bail-in in the BRRD and ad hoc derogations from priority rules in corporate restructuring. Bank resolution, bail-in, insolvency law, corporate restructuring, Directive 2019/1023/ EU, no creditor worse off, best interest of creditors, absolute priority rule, relative priority rule, standard of proof

Concordat Procedure as a Way to Escape Bankruptcy and the Evaluation of the Temporary Respite Decision Following the Amendment to the Law no. 7101: Current Developments and Experiences in Turkey

Concordat is a restructuring law which enables the debtor whose business does not go well and economic situation has deteriorated due to reasons beyond his control to pay their offer under proper conditions after the offer is accepted by the number of creditors provided in the law and ratified by the authorities. The legislator has opened the way for the debtors to terminate their debts by paying only a certain amount of them or at certain maturities by an agreement between the debtor and the creditor under the court supervision with the arrangement of bankruptcy. The significant legal amendments to the Law no. 7101 add another dimension to the concordat which is regulated by the provisions 285 and 309/I in Enforcement and Bankruptcy Law. The amendments in the Law no. 7101 regarding the provisions of concordat was affected by Swiss Enforcement and Bankruptcy Law. In these amendments, many provisions which prevented the concordat in the previous term were revised or revoked. The provisions on the postponement of bankruptcy that are in the favor of debtor were included into the concordat and temporary respite decision was accepted. Therefore, the followups that the creditors commenced will stop and new follow-ups will not start during the respite thanks to the opportunity to decide on temporary respite within the provisions on the concordat. Our study aims to make explanations and evaluations regarding the temporary respite decision which had not been included in Enforcement and Bankruptcy Law with the concordat procedure in Turkish Law until the significant amendments in the Law no. 7101. In this regard, general information will be provided about the concordat in Turkish Law, the concordat procedure will be explained and we will continue with the temporary respite following the request to arrange bankruptcy. Lastly, our study will be concluded with the evaluation of the concordat experience in Turkey within the current developments and implementation on the arrangement of bankruptcy.

Harmonising insolvency law in the EU: New thoughts on old ideas in the wake of the COVID‐19 pandemic

While the harmonisation of insolvency law in the European Union (EU) has been a top priority on the European institutions' agenda in the last decade, it is well known that this endeavour has been slow and has often met resistance from the Member States. The COVID‐19 pandemic revealed that top‐down harmonisation of insolvency (i.e., introduced at EU level) has been temporarily halted. The urgency to control or mitigate the economically and financially destructive effects of the pandemic has, nevertheless, forced European governments to adopt domestic strategies and laws in the area of insolvency. Interestingly, however, such measures show that insolvency and restructuring law responses to the COVID‐19 pandemic, albeit largely uncoordinated, reflect a phenomenon of bottom‐up harmonisation (i.e., introduced by Member States) indicating a convergence towards common approaches. This paper interrogates the insolvency law responses to the COVID‐19 pandemic in six European countries (Denmark, France, Germany, Italy, The Netherlands, the United Kingdom). It uncovers the inadequacy of the EU's harmonisation language, and the limits of harmonisation strategies in insolvency and restructuring law. Finally, it promotes the formulation of a wider‐encompassing definition of “legal harmonisation”.

THE FINANCING RESTRUCTURING LEGAL ANALYSIS FOR DEBTORS AFFECTED BY COVID-19 IN SHARIA MULTIFINANCE INSTITUTIONS

This study focuses on problematic financing by debtors affected by Covid-19 at Islamic multi-finance institutions in Semarang City, with the aim of finding the reality of the form of problematic financing experienced by debtors during the Covid-19 Pandemic. This study uses an empirical juridical approach, data analysis using descriptive-analysis methods. Based on the research that has been done, the regulation of the Financing Restructuring Law is guided by POJK Number 11/POJK.03/2020 concerning National Economic Stimulus as a Countercyclical Policy on the Impact of Coronavirus Disease 2019 which regulates asset determination, financing restructuring and provision of new funds. The impact arising from the existence of a financing restructuring policy for debtors affected by Covid-19 can be viewed from the following aspects: (1)Juridical Aspect, meaning that there are no sanctions for the financing institution as a creditor if it does not follow or apply, only based on the willingness of the creditor; (2) Economic Aspect, can help debtors to recover and stabilize the economy so that they can fulfill promises (achievements) to creditors; and for creditors the impact on financial activities or transactions that occurred during the Covid-19 pandemic can still be stable; (3)Psychological Aspects, meaning that one side fosters a strong mentality and confidence for creditors/financing customers to fulfill their obligations, and on the other hand, the existence of the presence of financial institutions is maintained in the future.

Breaking Up Is Hard to Do – What Brexit Means for UK Insolvency and Restructuring Law

Abstract This paper asks whether the UK can maintain its insolvency and restructuring pre-eminence post Brexit i. e. after Britain’s departure from the European Union (EU). In the past 20 years or so, the UK is said to have become the insolvency and restructuring capital of Europe or in less politically correct terms, the bankruptcy brothel of Europe. In part, this is because of the European Insolvency Regulation which provides for automatic recognition of insolvency proceedings opened in a EU Member State in the other EU Member States. Such proceedings may make provision for the discharge of debts and the restructuring of financial obligations.The specific insolvency law regime is part of a more general European Private International Law framework. With Brexit, the UK has now left this framework without any negotiated replacement agreement, a so-called ‘skinny’ Brexit. The loss of the ability to deal with insolvencies and corporate restructurings through a single process, with automatic recognition across the EU, may make it more complex, lengthy and expensive to resolve cross-border cases. It gives rise to the prospect of parallel proceedings in different jurisdictions. The paper also addresses how any disadvantages associated with the ‘skinny’ Brexit may be alleviated.