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Personal insolvency law in England and Wales: debtor advice, debtor education and the credit environment

Personal insolvency law in England and Wales: debtor advice, debtor education and the credit environment

The terminology of insolvency law is voluminous. There are at least eight terms of art describing the different species of insolvency practitioner (e.g. officeholder, administrator, nominee, supervisor, trustee in bankruptcy, liquidator, provisional liquidator, receiver, and, administrative receiver). In addition to this superabundance of titles there is also a second important issue regarding terminology and insolvency law, namely, negativity. Insolvency and its associated terms of art have a long history of negative use and perception that continue to percolate through into modern insolvency practice. It could be argued that the seepage of negative terminology from the position of factual insolvency across into the system of legal rules designed to deal with that insolvent estate, namely the law of insolvency, is itself corrosive. For well over 500 years terms of art associated with the legal state of insolvency and what we would now call the law of insolvency have given rise to at best notions of wrongdoing and ill-usage and at worst presumptions of criminal intent. 51 What is it about the law and
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Harmonising European Insolvency Law: The Emerging Role of Stakeholders

Harmonising European Insolvency Law: The Emerging Role of Stakeholders

According to Savage et al., stakeholders need to have both (i) an interest in the actions of an organisation, which arguably is present when an organisation’s ac- tions affect these interests, and (ii) be able to in fl uence the organisation. This is a more stringent definition compared with the definitions of the European Parlia- ment and Freeman, where either (i) or (ii) would suf fi ce to qualify as stakeholder. In light of the previous text, there would in general be two (not mutually exclusive) types of stakeholders from the perspective of the legislative ‘ business ’ of the Euro- pean Commission on insolvency law: (i) all those individuals and groups that can af- fect the drafting process of a legislative measure on insolvency law, in particular the Council, the Parliament and the Member States and (ii) all those individuals and groups that are affected by a legislative measure on insolvency. This could include, among others, companies, employees, insolvency practitioners and judges. In its current insolvency endeavour, the Commission provides, in particular, these latter stakeholders with a strong but informal influence on the legislative process that therefore fall within the scope of stakeholders as de fi ned by Savage et al. (1991).
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Towards an International Paradigm of Personal Insolvency Law? A Critical View

Towards an International Paradigm of Personal Insolvency Law? A Critical View

This article analyses three issues related to the global spread of personal insolvency laws. First, it outlines the emergence of an international paradigm on personal insolvency law and its central feature of a policy preference for partial repayment alternatives as the norm with residual immediate relief reserved for the deserving poor debtor. Second, it examines critically this paradigm in the light of existing empirical studies of the extent to which personal insolvency law achieves economic and social objectives associated with the fresh start such as financial inclusion. The mixed empirical findings on the success of personal insolvency law in achieving these objectives, particularly for individuals subject to instability of employment or poverty raises further questions about the role of personal insolvency law as a modestly progressive safety net for overindebtedness. The final section of the article considers therefore recent radical theories of consumer credit in contemporary capitalism which conceptualise credit as exploitative and personal insolvency law as a disciplinary and legitimating institution which individualises default and may neutralise collective responses to debt and its wider causes such as limited public support or provision. The article concludes by outlining how these radical insights might contribute to future socio-legal research on personal insolvency law.
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Insolvency Law as Credit Enhancement and Enforcement Mechanism: A Closer Look at Global Modernization of Secured Transactions Law

Insolvency Law as Credit Enhancement and Enforcement Mechanism: A Closer Look at Global Modernization of Secured Transactions Law

applied his enormous skills toward teaching and scholarship in the areas of insolvency law and secured transactions law. The cohort of legal scholars to which Jay and I belong were taught and inspired by a generation of professionals for whom these two bodies of law were inextricably tied. For these scholars, practitioners, and reformers a central, even dominant, issue in the United States during the mid-twentieth century was the treatment of nonpossessory security interests in insolvency proceedings—principally under the Bankruptcy Act and later the Bankruptcy Code. UCC Article 9 was conceived, created, and implemented under this background of bankruptcy law. The work of luminaries such as Grant Gilmore, Homer Kripke, and Peter Coogan, among others,
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Japan s Personal Insolvency Law

Japan s Personal Insolvency Law

The project involving the comprehensive reform of Japanese insolvency law started in October 1996, and was finished in November 2004. There are now two types of judicial proceedings for personal insolvencies under Japanese insolvency law. The first is straight bankruptcy proceedings based on the Bankruptcy Law, in which the debtor can be discharged; the other is special civil rehabilitation proceedings for individual debtors. In Part I of this Article, I offer a brief discussion of personal insolvency law, as well as bankruptcy proceedings and special civil rehabilitation proceedings, both for individual debtors. In Part II, I present an overview of the legislative discussion concerning the treatment of debtors, who might be able to repay more from future income than that which would be distributed in bankruptcy proceedings.
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Teaching and research in international insolvency law : challenges and opportunities

Teaching and research in international insolvency law : challenges and opportunities

practitioners, see Frank Kekebus, Thesen zur deutschen ‘Insolvenzszene 2020’, in: Werner F. Ebke et al. (eds), Insolvenzrecht 2.020, Deutsches, Europäisches und Vergleichendes Wirtschaftrecht, Band 81, Baden-Baden: Nomos 2014, 111ff. See also my editorial ‘Changing Rules: Challenges for the Profession’, in: European Company Law 7, issue 2 (2010), from which I take: ‘With all these sweeping reforms, the question forces itself upon us: are insolvency professionals equipped to act and implement the rules, according to its underlying policies? A famous saying in the English Cork report (1982) is that the success of any insolvency system is very largely dependent upon those who administer it. In Europe, insolvency practitioners can be very different animals, with a variety of cultural and professional background, and large differences in legal and disciplinary rules regarding fairness to all interests involved and accountability. They are accountants, lawyers, corporate recovery specialists and turn around professionals. What these substantial reforms … demonstrate is that it is at least necessary to develop a much broader expertise in matters of insolvency law, company law or general contract law and also to develop know how concerning such matters as financial restructuring, accounting, tax, strategy and communication. An (insolvency) practitioner with this skill set seems the ideal candidate for the recovery of a company in the “twilight” zone. A key point in any system should be that an insolvency practitioner is receiving the confidence and respect from all stakeholders. Without that, any system is due to fail. Therefore, changes in substantial rules, including rules or practices in pre-insolvency stages are just as many challenges for any practitioner to keep pace with these developments. Turbulent times with restless rules require solid and qualified professionals.’ Law Schools would better start to think now how to best educate in this area of consensual out-of-court restructuring, leading to a multiparty agreement, with a good understanding what all interested parties wish to gain and to have them understand that they to need to give in (stakeholder management) and to convince holding out creditors to come to unanimity (understanding ‘hold out’ or ‘nuisance value’) in the absence of in-court or court-imposed binding decisions.
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Introduction to German Insolvency Law 1

Introduction to German Insolvency Law 1

In 1999 an absolutely new era of insolvency law has started in Germany. After almost 20 years of discussions, hearings and negotiations the Insolvency Statute (Insolven- zordnung (InsO)) has replaced the Bankruptcy Act (Konkursordnung) and the Settle- ment Act (Vergleichsordnung) in the West German States and the Total Execution Act (Gesamtvollstreckungsordnung) in the East German States. The former bank- ruptcy law had largely proven to be unfunctioning 3 . Under the Insolvency Statute the preconditions for the opening of insolvency proceedings should be formed in a way that would allow to open more insolvency proceedings than under the Bankruptcy Act (under the Bankruptcy Act 84 % of the requests to open bankruptcy proceedings were dismissed because of the lack of sufficient assets). The introduction of a possi- ble self-administration of the debtor under the supervision of a court appointed cus- todian by the Insolvency Statute 4 was supposed to facilitate the decision for a timely beginning of insolvency proceedings. The law of avoidance was intensified 5 . More- over the insolvency proceedings are now much more determined by the autonomy of the creditors. Another basic change is that the secured creditors now take part in the insolvency proceedings. They join the meeting of creditors and are entitled to vote. Finally the Insolvency Statute for the first time contains proceedings by which a debtor if he is a natural person can receive a discharge (Restschuldbefreiung) 6 . All main court decisions are published and can be researched in the internet 7 .
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Cross-Border Insolvency Law in Europe: Present Status and Future Prospects

Cross-Border Insolvency Law in Europe: Present Status and Future Prospects

rules as falling under the domain of insolvency law or corporate law. 45 In addition, the regulation’s compatibility with domestic legal systems of Member States leave much to the activity of Member States, where some guidance from the regulation would have been welcome, for example, articles 31-37 and the lack of any procedural rules. 46 Another group of recommendations relate to the topic of international jurisdiction. As signalled above in dozens of court cases the general description for 'centre of main interest' is not sufficient to encompass all types of debtors, for example, natural persons as private persons, natural persons as professionals, smaller companies and larger (groups of) companies with segregated 'management and control' ('head office functions') and factual operations. 47 In addition, the ‘COMI’ decision seems to be too 'compressed' as a court’s decision on the opening of insolvency proceedings also comprises – by matter of law – the decision concerning the applicable law, the extension of this law and of the powers of the liquidator throughout Europe. 48 There is no guarantee that the information the court receives is complete, an uncontested decision can be made by a party who has an interest. Several procedural rules lack or seem vague, for example, the procedural rights and duties of parties – including creditors – to be involved in the 'COMI' decision, including the full and fair opportunity to present the facts and the law of a parties’ case and, likewise, the same opportunity to comment on evidence and legal arguments provided by other parties. 49
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Bail-in from an insolvency law perspective

Bail-in from an insolvency law perspective

The BRRD and SRM Regulation follow a combination of the two mentioned approaches. 226 In addition, they require that losses are imposed on capital instruments that count as AT1 and T2 instruments, which are subordinated claims of investors in the bank, before other subordinated liabilities. 227 Only if AT1 and T2 instruments are reduced in full, other subordinated debt, including capital instruments that do not meet the criteria for AT1 or T2 instruments under CRR, 228 and senior debt are reduced or converted in ascending order under national law. It is the author's view that four resolution principles set out in Article 34 BRRD and Article 15 SRM Regulation are relevant in this context: (i) the shareholders of the bank under resolution bear first losses; (ii) the creditors of the bank bear losses after the shareholders, in accordance with the hierarchy of claims under insolvency law, unless otherwise provided; (iii) the creditors in the same class are treated in an equitable manner, unless otherwise provided; and (iv) covered deposits are fully protected. 229 The latter principle is complied with through the creation of depositor preference, which is further discussed below, as well as the exemption of that part of deposits covered by a deposit guarantee scheme from the scope of the bail-in mechanism. 230 Other liabilities excluded from bail-in under the BRRD and SRM Regulation are (i) secured liabilities, 231 (ii) liabilities arising from the holding of client assets or from the bank acting as a fiduciary in a fiduciary relationship, (iii) short-term liabilities to other institutions, (iv) short-term liabilities owed to payment and securities settlement systems, and (v) liabilities owed to employees, to commercial and trade creditors, to tax and social security authorities and to deposit guarantee schemes. 232 Furthermore, the resolution authorities also have some discretion to exclude or partially exclude other liabilities in exceptional circumstances themselves in the resolution of a specific bank, and, accordingly, grant different treatment to claims that would rank equally in liquidation. The exclusion is for instance allowed if it is strictly necessary and proportionate to achieve the continuity of critical functions and core business lines. 233 The BRRD and SRM Regulation explicitly indicate that this may mean that the level of write down or conversion of non-excluded instruments and liabilities needs to be increased, but the ncwo principle needs to be complied with. 234
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Towards an International Paradigm of Personal Insolvency Law? A Critical View

Towards an International Paradigm of Personal Insolvency Law? A Critical View

relief might have different consequences for these groups. Debt advice agencies may already explicitly or implicitly tailor advice based on these typologies, but further research on the debt career of these distinct groups and the effects of bankruptcy on the career should be undertaken. Second, the extent of the benefit of the fresh start may depend on the practices of market actors such as banks 124 and credit reference agencies. It is the rules of credit reporting systems, used by creditors, insurance companies, employers and landlords, rather than the law, which may determine the availability of services for individuals who have filed for bankruptcy. 125 The English attempt to use the Bankruptcy Restriction Order signal as a warning for the market by separating culpable from innocent bankrupts seems to have had little effect on credit reporting systems. 126 Third, bankruptcy as presently structured, may be a limited remedy for certain groups who suffer from continuing instability of employment, long term poverty or unemployment. It may represent a temporary relief but may need to be integrated with better social protections. 127 It is not a substitute for such protections. Existing measures to alter bankrupts’ behaviour through counselling are unlikely to be effective in addressing the problems faced by this group. 128 The studies pose the research question of how personal insolvency law, a private law form of consumption insurance, fits with social insurance and welfare provision, which may differ between countries. Fourth, Howard, in an analysis of ideas associated with the fresh start, poses the question whether bankruptcy is expected to serve too
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The new "Restructuring agreement with financial intermediaries" and other evolvements in insolvency law

The new "Restructuring agreement with financial intermediaries" and other evolvements in insolvency law

The Italian Government has approved Law Decree No. 83/2015 of 27 June 2015, which introduces important new measures on Insolvency Law, Civil Law, Civil Procedure Law and Court Administration. This briefing focuses on the changes affecting Italian insolvency law. For a description of the new measures adopted to streamline and expedite credit enforcement proceedings, please refer to our earlier client briefing on "New enforcement procedure rules: the reform introduced by Law Decree no° 83 of 27 June 2015".

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US exceptionalism and UK localism? Cross-border insolvency law in comparative perspective

US exceptionalism and UK localism? Cross-border insolvency law in comparative perspective

26 On the UK generally, see the judgments of Lord Hoffmann in Cambridge Gas Transport Corporation v Official Committee of Unsecured Creditors (of Navigator Holdings Plc) [2007] 1 AC 508 and in Re HIH Casualty and General Insurance Ltd [2008] I WLR 852 distinguishing between the universalism and territorialism of insolvency proceedings and referring to the principle of modified universalism as the ‘golden thread’ of the common law. It should be noted that while Lord Collins in Rubin v Eurofinance [2012] UKSC 46 at para 92 hails ‘ Lord Hoffmann’s brilliantly expressed opinion in Cambridge Gas and his equally brilliant speech in HIH ,’ the UK Supreme Court in Rubin holds that Lord Hoffmann was wrong in Cambridge Gas. In Rubin the UK Supreme Court paid lip service to the principle as an underlying principle of international insolvency law, but effectively denuded the principle of much practical power. The court seemed to foreclose the possibility of further judicial developments in this field leaving the matter within the exclusive domain of the legislature and reciprocal arrangements with other countries. See also to the same effect the Privy Council in Singularis Holdings v PricewaterhouseCoopers [2014] UKPC 36 where Lord Neuberger at para 157 referred to ‘the extreme version of the principle of universality’ in Cambridge Gas.
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Varieties of creditor protection: insolvency law reform and credit expansion in developed market economies

Varieties of creditor protection: insolvency law reform and credit expansion in developed market economies

(ii) Credit contracts. This part of the index (10 variables) deals with the existence, feasibil- ity and enforcement of ‘self-help’ mechanisms which creditors use to protect their interests. They include laws which protect the ability to take various forms of security or collateral. The variables covered include those relating to mortgages, floating charges, financial collateral and retention of title clauses; the enforcement of those interests through the seizure and sale of assets; the appointment of receivers without a court order and insolvency set-off clauses which entrench secured creditors’ interests. How the law recognizes and ranks such claims is at the core of its role in replacing ‘the free-for-all attendant upon the pursuit of individual claims by different creditors’ (Goode, 2011) with a regime in which creditors’ rights and remedies are coordinated and a wasteful ‘race to collect’ avoided. The rise of new and complex financial instruments available on the market and the contested status of proprietary claims in an in- creasingly globalized legal environment have been reshaping this aspect of insolvency law in the period of our study (see; Jackson, 1982; Mokal, 2001; Westbrook, 2004; Schillig, 2014). (iii) Insolvency procedures. This sub-index (19 variables) concerns the procedures govern- ing corporate reorganizations and liquidations. It deals with the rules relating to the triggering of insolvency (or ‘corporate bankruptcy’) proceedings by shareholders and directors; whether creditors can file for insolvency proceedings on a balance-sheet basis, which may make the firm more vulnerable to being broken-up; whether a single creditor can initiate liquidation proceedings; the availability to the firm of a stay or moratorium in liquidation and rehabilita- tion proceedings, deflecting creditors’ claims; whether directors can retain control during rehabilitation proceedings; whether secured creditors alone, unsecured creditors, shareholders or courts have the power to appoint a bankruptcy trustee or administrator; rules on voting over the firm’s exit from bankruptcy and priorities between different creditor groups in liquidation and rehabilitation proceedings.
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Soft law instruments in restructuring and insolvency law: exploring its rise and impact

Soft law instruments in restructuring and insolvency law: exploring its rise and impact

(ii) Other international standard-setting organisations In the field of restructuring and insolvency, the organisa- tions mainly consist of practitioners, judges and academ- ics. 24 INSOL International’s 25 aim is to compare aspects of national insolvency law between countries, the mutual exchange of information and experience and the building of networks between professional individuals. One of INSOL International’s more recent initiatives is the re- vised Statement of Principles for a Global Approach to Multi-Creditor Workouts II (Statement), published in 2017. It is a set of principles to promote informal restruc- turing. The Statement comprises eight principles indicat- ing ‘best practices’ for a company experiencing financial difficulties which also has a large number of (foreign) creditors. The Principles are jurisdiction neutral. Another international standard-setting organisation is the International Insolvency Institute (III). 26 The III aims to promote and advance international insolvency law, and in particular, to support better cooperation in cross- border insolvency cases. An III Committee on Interna- tional Jurisdiction and Cooperation drafted Guidelines for Coordination of Multinational Enterprise Groups that were presented in 2013. Whereas, in general, emphas- is has been on liquidating rather than restructuring finan- cially overcommitted businesses and single entities rather than enterprise groups, these Guidelines address and in- corporate liquidation and restructuring of enterprise groups. 27
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Corporate Insolvency Law In Singapore

Corporate Insolvency Law In Singapore

The primary purpose of insolvency law is to replace the “free for all” pursuit of claims by individual creditors, when the debtor is unable to pay all of his debts, with a statutory regime which is exercised as a collective effort. Creditors’ rights and remedies are suspended, wholly or in part, to ensure the orderly realisation of the debtor’s assets and the fair and equitable settlement of creditors’ claims. Insolvency law is distinct and separate from debt collection law. The latter deals with a claim or a contest between the debtor company and a particular creditor.
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Insolvency statutory rules and contractual freedom: a study on the limits of corporate insolvency law in the Anglo/American tradition

Insolvency statutory rules and contractual freedom: a study on the limits of corporate insolvency law in the Anglo/American tradition

relies entirely on the debtor’s ability to maximise the assets of his company. (Re)Distributive insolvency rules are based on the fundamental policy of insolvency law that all creditors (at least, those of the same class) are equal and should be treated in the same manner. Even assuming that the morality of equal treatment is not disputed, Bowers observes that the existing bankruptcy policy is incomprehensible. If creditors were equal to each other, debtors would have no need to prefer or disfavour any of them and there would be no need for statutory rules that prescribed equality of treatment. Yet, in the British Eagle case, IATA companies would have been favoured over non-IATA members. At the same time, those same rules that should promote equality in reality encourage practices that favour differential treatment among similar creditors. For instance, if a supplier is deemed essential for the debtor, payments towards this company can remain current throughout the pre- and post-insolvency period even if other similarly-ranking creditors are paid little or nothing.
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German Insolvency Law

German Insolvency Law

The interim period between the filing for insolvency and the decision of the Insolvency Court whether to open final insolvency proceedings is often referred to as the preliminary insolvency proceeding (vorläufiges Insolvenzverfahren) or opening proceedings (Insolvenzeröffnungsverfahren). The Insolvency Court does not automatically open insolvency proceedings upon receipt of a corresponding filing. During the preliminary proceedings it determines whether an insolvency ground in fact exists. Except in cases where the debtor is a small company and does not reach certain economic thresholds or where its business operations have been discontinued or the appointment would be disproportionate, the Court will appoint a preliminary creditors’ committee. This committee’s most important right at this stage is that it can nominate a candidate for appointment as preliminary insolvency administrator by the Insolvency Court. In principle, the Court cannot depart from this suggestion if it is unanimous and the candidate is suitable. Therefore, the preliminary insolvency proceeding is a crucial stage for creditors as they can use the preliminary creditors’ committee to entrust the pro- ceedings to an insolvency practitioner of their choice. This constitutes a significant deviation from the former law which gave over the sole responsibility for the choice of the preliminary insolvency administrator to the Insolvency Court. Usually, upon appointing the preliminary insolvency administrator the Court will also order that all or certain transactions of the debtor require the preliminary administrator’s consent, otherwise leaving the debtor’s legal representatives in charge of conducting the debtor’s business. However, it is in the Court’s discretion to grant further powers to the preliminary administrator and even transfer the administration of the debtor’s business entirely to the preliminary administrator. For creditors who are doing business with the insolvent company at this stage, it is important to determine what kind of power has been vested in the preliminary administrator and what other restrictions the Court has imposed, for example, a stay of individual enforcement measures. Depending on this, their claims resulting from business transaction with the debtor may be preferential or not. Generally, claims arising from transactions entered into by the insolvency debtor with the consent of the preliminary administrator rank only as unsecured insol- vency claims.
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Secured Credit and Insolvency Law in Argentina and the U.S.: Gaining Insight From a Comparative Perspective

Secured Credit and Insolvency Law in Argentina and the U.S.: Gaining Insight From a Comparative Perspective

But Article 9 does not extend to real estate financing. Real property must be covered by a mortgage or similar formal real estate security document. The law of real estate financing i[r]

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Capital Structure, Creditor Composition, and Insolvency Law in Japan

Capital Structure, Creditor Composition, and Insolvency Law in Japan

Concentrated firm capital structures and small, relatively homogenous groups of secured bank creditors appear to have produced conditions under which private negotiation of business failure was perceived as an adequate remedy and relatively more desirable than reliance on legal process. The availability of adequate market methods likely reduced the demand for legal process, obviating the need to address procedural and substantive defects in Japan’s insolvency laws. The deregulation of Japan’s capital markets enabled firms to reorganize their capital structures, increasing the number and diversity of creditors and likely weakening the influence of bank creditors. This article suggests that changes in capital structure and creditor composition may have created barriers to the negotiated resolution of business failure, necessitating the availability of adequate and effective legal process. Yet without reform, Japan’s insolvency laws remained ill-suited to use by creditors.
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Conceptualising upcoming Chinese bank insolvency law: Cross‐border issues

Conceptualising upcoming Chinese bank insolvency law: Cross‐border issues

China is now a major international market participant and facing a large number of cross ‐ bor- der transactions, which may also involve corporate and bank insolvency issues. Attention should be paid to the upcoming Chinse Bank Resolution Regulation regarding cross ‐ border issues. In terms of the legal framework, Article 5 of the EBL is expected to remain the same in the near future and be the governing law for cross ‐ border bank insolvency and resolution. However, this article only stipulates the recognition and enforcement proceedings and other cross ‐ border issues, such as jurisdiction and applicable law, are not adequately addressed. With- out significant amendments to Article 5, cross ‐ border bank insolvency and bank resolution would encounter great uncertainty in the future. Within the current regime, special features of bank resolution should and can be taken into consideration. This paper proposes that the pre- vious legal cases and regulatory practices of financial supervisors could add a valuable
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