Transcript Slide 1

INSOL Europe Academic Forum and Sussex Law School, Brighton, UK
Looking Forward to
the Cork Report + 30
Friday 27 March 2009
Introduction to
Academic Forum
Activities 2007-2009
Paul Omar,
Secretary, IEAF
Past Projects/Events:
•
Monaco Conference 14 October 2007
•
Formation of Mgmt Board/Sup Board
•
Website/Publicity/Mailings/Membership
•
Leiden Conference 5-6 June 2008
•
Barcelona Conference 1-2 October 2008
•
Adoption of Logo/Branding:
Sponsorship:
•
2007-2010
•
Travel Grants
•
Research Grants
•
Book Prizes
•
Edwin Coe Lecture
Future Planning/Events:
•
Stockholm Conference October 2009
•
Book Projects/Conf Reports
•
Co-Operation with INSOL Int’l Acad Group
Session 5:
The Comparative
Perspective
Chair: Florian Bruder,
Max-Planck Institute,
Hamburg
Chinese Insolvency
Law: Influences from
the UK and Elsewhere
Professor Rebecca Parry,
Nottingham Trent University
• Overview
–Background to the Enterprise
Bankruptcy Law 2006
–Influences on this law
–Impact of UK law
• Previous Law
–Enterprise Bankruptcy Law (for
Trial Implementation) 1986
•Applied only to SOEs
• Previous Law:
–Civil Procedure Law
•Contained bankruptcy laws
applicable to private
enterprises
• Barriers to reform:
- Political concerns:
- Potential redundancies
- Lack of a social safety net
- Potential for social unrest
• Barriers to reform:
- Technical concerns e.g.
appropriate governance of
proceedings
• Drafters reviewed the laws of
many jurisdictions
• Chief influences:
• Germany, Australia and the
USA
• New concepts in the EBL
2006:
- Reorganisation
- Administrator
• Some influence of UK law in
cross border insolvency
provision, Article 5
• Property Rights Law, in effect
from October 1 2007
- floating charges
• Onward UK influence?
- Assetless insolvencies.
The Influences of AngloAmerican Insolvency Laws in
Central & Eastern Europe
Tomas Richter
Clifford Chance LLP/Charles University
Prague
Motto:
“Foreign law can be influential
even when it is totally
misunderstood.”
Alan Watson, Legal Transplants,
1974/1993 , p. 99
• The Themes
- The possible sources of
influence of A-A law in the C&EE
- Evidence from the recent past
- Distinguishing features of A-A
insolvency law
- Several real-life examples from
C&EE jurisdictions
- The possible future
• Possible sources of influence
– The domination of US and UK banks in xborder finance coming into the region after
1989
– The domination of US and UK law firms in
legal advisory on this x-border finance
– The domination of English as the language
of x-border finance (and commerce in
general) and the EU
– The domination of the US in the World
Bank/IMF, the domination of the UK in the
EBRD, their influence in the UNCITRAL, etc.
• Evidence from the recent past
– The deal “tombstones” from the 1990s
– The office lists of major London and US offWall Street law firms
– The “legislative guide”-type projects: EBRD
on secured transactions (1994), The World
Bank on principles for effective insolvency
(2001), The World Bank “Doing Business Closing a Business” project (on-going),
UNCITRAL guide on insolvency law (2005),
UNCITRAL guide on secured credit law
(pending)
• Distinguishing features of A-A
insolvency law
– UK: (1) the domination of the principal
secured creditor acting through the private
trustee; (2) reliance on the insolvency
professional as the „gate-keeper“
– US: (1) the non-liquidation proceedings
conducted under the domination of present
management; (2) reliance on the insolvency
judge as the „gate-keeper“
– Convergence of the two approaches
– Other features are common : avoidance
• Real-life examples from selected
C&EE jurisdictions (CZ, SK* + Lith,
Lat, Est**)
– The enterprise charge (a priority device vs.
a control device)
– The insolvency professional /judge as the
„gate-keeper“
– Non-liquidation proceedings
(reorganization)
– Avoidance of antecedent transactions
*Czech Insolvency Act 182/2006; Slovak Bankruptcy and Reorg. Act 7/2005; Czech and
Slovak Civil Codes 40/1964
** www.doingbusiness.org; Lowitzsch, J. (ed), The Insolvency Law of C&EE, INSOL Europe
2007
• The enterprise charge
– As a priority device (all surveyed
jurisdictions, except for Lith)
– As a controlling device inside
insolvency proceedings (potentially in
SK and CZ, but to be seen)
• The insolvency professional /judge
as the „gate-keeper“
– The professional (SK (but has „DIP“ in reorg.),
Est, Lat)
– The judge (0 (save perhaps for Lith))
• Other
– The creditors (CZ, SK, Est, Lat)
– Quantitative threshold (CZ)
• Non-liquidation proceedings
(reorganization)
– Profoundly influential in SK and CZ
(although different in detail, esp. as
regards entry) and also in Lith
– Clearly detectable in Est and Lat
• Avoidance of antecedent
transactions
– Some degree of UK / US influence
can be detected in all surveyed
jurisdictions (save perhaps for Lith)
– CZ and SK influenced strongly via the
UNCITRAL Legislative Guide on
Insolvency Law
• The possible future
– Implications of the current
financial/economic crisis for the
prestige and credibility of A-A
institutional solutions
– Including A-A financial law (in the
broadest sense of the term)
– A possible preview …. (see overleaf)
The Financial Times 23 March 2009
The Financial Times 23 March 2009
• Conclusion
– Questions?
– Anwers?
– Thank you.
[email protected]
http://ies.fsv.cuni.cz/en/staff/richter
CANADIAN CORPORATE
INSOLVENCY RESCUE
VEHICLES
Professor Jacob Ziegel
University of Toronto
A. Introduction

Two Main Vehicles:
• Commercial Proposals (BIA Part III,
Division 1)
• Arrangements under Companies’
Creditors Arrangement Act (“CCAA
Arrangements” or “Plan”)
•
•
•
•
•
•
•
•
Both vehicles governed by federal law
Both much amended since first introduced
Most important amendments: 1992, 1997, 2005-2007
Commercial Proposals by far more common of two
vehicles– and much the more popular. In year ending
Aug 31, 2008, 1308 proposals were filed or 21% of
6,151 straight business bankruptcies.
Commercial Proposals much cheaper than CCAA
Arrangements. Also available to all businesses,
incorporated or not; also to consumers with large debts
CCAA restricted (with one exception) to corporate
debtors, Canadian or foreign, and must have minimum
liabilities of Can$ 5 million
CCAA proceedings also much more court driven,
therefore much more expensive
Annual no. of CCAA filings substantially less than 100
(no accurate statistics available so far)
B. Commercial Proposals

I. Initiation of Proceedings
• One of two ways: (a) Debtor’s Notice of
Intention (NOI) to make proposal; (b) making
of Proposal at outset
• Both steps result in immediate stay of
proceedings by all creditors
• NOI good for 30 days but can be extended
with court’s consent
• Maximum period 45 days per extension.
Aggregate extension 5 months

II. Trustee’s Roles (trustee must be
retained at outset of proceedings)
• To notify creditors of NOI/Proposal
• To advise creditors of adverse change in
D’s financial circumstances
• To assist D in preparation of Proposal
• To administer Proposal if P accepted by
creditors & approved by court

III. Acceptance of Proposal
• P must be accepted (a) by majority of creditors
in each class holding two thirds
thirds in value of claims, and (b) by court;
• Commonality test applied to classes of secured
creditors
• Court must reject P if not satisfied (a) that
terms of P reasonable, and (b) that terms
benefit general body of creditors
• Court cannot override votes of dissenting
creditors (no US Chapter 11 type cram down
power)

IV. Measure of Success of Proposal
Regime
• Despite great popularity of proposals,
significant failure rate at every stage of
proceedings and high overall failure rate
C. CCAA Proceedings

I. Initiation of Proceedings
• Ex parte application to court to convene meeting of
creditors (“holding order”) accompanied by “first day”
orders
• ‘First day’ orders include



Sweeping stay of proceedings order binding on all creditors
Requiring third parties to continue to honour agreements
with Debtor (some exclusions)
Appointment of Monitor by court
• Roles of Monitor – M is officer, & eyes and ears, of court
with respect to management’s conduct of D’s affairs,
negotiations among parties, and prospects for an
acceptable plan
• Debtor company’s management remains in place though
court has power to remove for cause

II. Debtor in Possession (DIP)
Financing
• Widely used in CCAA proceedings
• Initially introduced by judicial fiat;
power now conferred by statute
• DIP orders usually confer superpriority
status on lender

III. Court’s Inherent Powers to fill
gaps in Legislation
• Important role prior to 2005-2007
amendments
• Still very important. E.g., Mansfield
Alternative Investments II Corp (Re)
(2008), 296 D.L.R. (4th) 133 (Ont.
C.A.)

IV. Classification of Creditors & Creditors’
Approval of Plan
• Canadian courts have adopted antifragmentation test for secured creditors.
Courts also frequently approve separate
classes of unsecured creditors to promote
approval of plan. Small creditors will often be
paid off in full to simplify approval of plan
• Each class of creditors must approve Plan by
majority in number and two thirds in value of
voting creditors

V. Court Approval of Plan
• No formal test of approval in legislation. Long
established jurisprudence that plan must be
“fair and reasonable” to all parties in plan
• No automatic bankruptcy order if creditors
reject plan or ct withholds its approval. Debtor
free to resume negotiations for revised plan
unless creditor files bankruptcy petition
D. Important Distinctions between
Canadian and UK Approaches to
Corporate Rescues



Accessibility and popularity of Canadian
commercial proposals despite high
failure rate
Heavily court driven CCAA plans of
arrangement and use of inherent powers
doctrine to fill gaps in legislation
In Canadian proceedings, debtor’s
management continues to run debtor’s
affairs though subject to monitor’s
watchful eye
E. Evolving Changes

As in the UK for significantly longer
period, out of court arrangements
are becoming more common in
Canada during the current financial
crisis & for the same reasons – to
save costs and to avoid long delays
The Influences in
South East Asia
Professor Aishah Bidin,
Universiti Kebangsaan
Malaysia
Session 6:
European and
International
Perspectives
Chair: Professor David
Milman, Lancaster University
A Practitioner’s
Perspective
Gabriel Moss QC,
3/4 South Square
Bridging the Gulf of
Expectations
Chris Laughton,
Mercer and Hole
European
Benchmarking
Ronald Harmer, UCL
Neil Cooper, ZolfoCooper
Closing Address
Paul Omar,
University of Sussex
INSOL Europe Academic Forum and Sussex Law School, Brighton, UK
Looking Forward to
the Cork Report + 30
Friday 27 March 2009