International Insolvency Review

Publisher:: Wiley
Publication date:: 2021-02-01

ISBN:: 1099-1107

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The position of shareholders in the restructuring proceedings of distressed companies: From a shareholders' veto power to their duty to enforce (Aufopferungs‐ or Duldungspflicht) a restructuring plan
This article addresses the problem of the position of equity holders in restructuring proceedings, tackling a new issue in the overall European scenario of insolvency law, where innovative rules have been introduced on this topic in Germany (ESUG), France (loi Macron), Spain (ley concursal), besides the new provisions laid down by the EU Preventive Restructuring Directive. Overall, these rules target the same outcome, while relying on different tools, namely, to overcome the veto power of shareholders in the enforcement of an approved and confirmed restructuring plan. Shareholders can in fact resort to their veto power pursuant to company law when dealing with structural operations having an impact on the property structure of a distressed company, that is, a debt‐equity‐swap. This article focuses on the rules governing the position of shareholders as laid down in Article 163, paragraph 5 and Article 185, paragraph 6 of the Italian Insolvency Law (IIL), in force since 2015, which will be probably amended in September 2021 by Articles 90 and 118 of the new Italian Crisis and Insolvency Code (ICC). The article ultimately provides a comparison with the legal framework in other European countries as well as in the EU Preventive Restructuring Directive. Many issues arise from the new Italian regulation, in particular regarding its field of application, its relationship and its coordination with company law and the protection of shareholders' property in the shares.
Energising courts to continue breaking new ground in insolvency and restructuring cases
The role of judges in restructuring and insolvency proceedings has been of particular interest to the EU legislator in recent years. It is in matters of insolvency and restructuring that a court and its judges have to fulfil a set of five criteria: (a) a general understanding of business management (so as not to assume managerial tasks), (b) understanding what is needed to effectively enforce the rights of both secured and unsecured creditors outside of insolvency proceedings (as, for instance, a stay may influence pre‐insolvency enforcement rights), (c), preferably, be a specialist in commercial matters, (d) be impartial and independent, and (e) where practical, have specialised insolvency expertise. Where businesses are operating across borders, the latter criterion includes cross‐border knowhow.During the 20th century, several steps have been developed with the aim of improving the environment within which these criteria can be met. Courts themselves may wish to improve their level of quality and effectiveness. In this contribution, several examples are discussed that have been put in place or will emerge soon that can enhance the court's professional standing and its performance, in (international) insolvency and restructuring, as a “good” judge. These developments may assist Member States in improving their judicial frameworks, as well as (associations of) members of courts or judicial and administrative authorities dealing with procedures concerning insolvency and restructuring in developing the necessary expertise for their responsibilities as formulated in the EU Preventive Restructuring Directive. Moreover, the duty of cross‐border cooperation between courts in EU law underpins the discussion and the importance of cooperation as is underscored by the adoption of this Directive.
The performance of the courts in the digital era: The case of insolvency and restructuring proceedings
The performance of the courts has been at the center of both political and public debates around the world and is one of the success indicators in the development of public policies on access to law and justice, particularly as regards the right to obtain a decision in reasonable time. The introduction of new information and communication technologies has been essential in extending this access to law and justice in two ways: as a way of making courts function more efficiently; and as an instrument for measuring and assessing the level of compliance with established policy objectives. Anchored in this “computerization of justice” movement, we intend to analyze its role in the overall performance of the courts in an important and central area for the economy and the functioning of the markets: corporate insolvency and restructuring. In order to achieve this purpose, a series of interviews was carried out with several key judicial players and stakeholders. What has been found in this research shows that day‐to‐day reality is not yet fully in line with policy purposes and legal provisions. Technologies still play an ambivalent role: despite streamlining processes, they raise new difficulties and challenges that require constant improvements.
Corporate Restructuring and Insolvency in Asia 2020, Asian Business Law Institute (2020, ABLI, Singapore) 804 pp., SGD 495, ISBN 978‐981‐14‐4963‐5 (print), 978‐981‐14‐5158‐4 (e‐book)
Guest editorial: The performance of the courts put to the test
Reinventing Bankruptcy Law: A History of the Companies' Creditors Arrangement Act, Virginia Torrie (ed) University of Toronto Press, Toronto), 2020 317 pp., C$ 56.25, ISBN 978‐1‐4875‐0642‐1
The relation between duration of insolvency proceedings and their efficiency (with a particular emphasis on Polish experiences)
The following article addresses the issue of the duration of insolvency proceedings (both winding‐up and reorganization) and its influence on the efficiency of the proceedings. The previous opinion presented in the literature, according to which shorter and cheaper insolvency proceedings contribute to establishing enterprises, has been recently reflected in a Directive of the European Parliament and of the Council on preventive restructuring frameworks. It expressly states that the excessive length of restructuring, insolvency and discharge procedures is an important factor triggering low recovery rates and deterring investors from doing business in jurisdictions where procedures risk taking too long and being too costly. It was also pointed out that reducing the length of restructuring procedures would result in higher recovery rates for creditors as the passing of time would normally only result in a further loss of value for the enterprise. Moreover, to promote efficiency and reduce delays and costs, the EU Directive recommends introducing flexible preventive restructuring frameworks. The research carried out within the ACURIA project, particularly interviews, allows us to answer the question about possible discrepancies between the law on the books and the law in action with respect to provisions on duration of the proceedings. Based mainly on the case study and the interviews with practitioners, this article shows that, despite a relatively modern framework, the length of the proceedings may not be satisfactory and ‐ in the case of Poland–is due to non‐legal factors and “law in action,” which are both basic barriers to the implementation of the time limits for proceedings introduced by the legislator. The study confirms that the thesis that the statement about the need to reduce the excessive length of insolvency procedures in many of the EU Member States resulting in legal uncertainty for creditors and investors and low recovery rates is true. It will also be demonstrated, however, that the duration of the proceedings is only one of the criteria for assessing the effectiveness of the proceedings, along with the costs and recovery rate. It has been pointed out in the interviews that, in practice, there are proceedings in which, due to the deliberate extension of proceedings, all creditors ultimately have been fully satisfied.
“Come and talk”: The insolvency judge as de‐escalator
How insolvency courts handle conflicts is an important aspect of the Directive on preventive restructuring frameworks and it has become more important in the current COVID‐19 crisis, as a result of which insolvencies are or will be on the rise. Insolvency courts are one of the key actors that can impact the length and costs of conflicts, and, consequently, the effectiveness and efficiency of insolvency proceedings. However, there is a lack of empirical research that examines when, why and how insolvency courts prevent actual or potential conflicts. This article reports the results of an empirical study that explored the strategies used by insolvency judges in the Netherlands to resolve conflicts and to prevent a dispute from becoming one. The results show that insolvency courts deploy “under the radar” mediation‐like strategies to prevent actual and potential conflicts involving insolvency practitioners, enhancing the speed and cost‐effectiveness of the winding‐up of cases in the perceptions of stakeholders. Consequently, insolvency judges do not only act as adjudicators in court proceedings, but also take on mediation‐like roles, at least in some jurisdictions. Limitations and challenges of these roles are discussed. The findings of this study are relevant for determining and regulating the roles and tasks of insolvency judges.
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