Not have an equivalent to the US practice of

court-supervised debt restructuring?

The principle that it is preferable for

Insolvent companies (as well as their

Creditors and other stakeholders) to be

Reorganised rather than liquidated has long

Been recognised in the US and is now

Accepted in most European jurisdictions.

However, while the US Bankruptcy Code's

Chapter 1.1provides a clear framework for

Such reorganisations, the equivalent statutory

Regimes in Europe do not.

Chapter provisions significantly

improve companies' prospects of

Restructuring their balance sheets and

Avoidinginsolvency.These provisions are not

Perfect, but after more than 20 years of

Application in the US, most commentators

Would probably agree that Chapter I I

Provides a comprehensive and workable

Mechaqisrf;Jifor delivering a restructuring.

The key

Destruction of

Early protection--a

File for Chapter Protectioq voluQtarily

And, importantly,can do so regardless of

Whether it can show likely

To be, insolvent;

The automatic stay,which preveQts both

Secured and unsecured creditors from

Taking proceedings againstthe compaQY

(also leadingto a sensible and practical

Approach to handlingsecured claims);

So-called debtor-in-possession powers,

Which permit existingmanagement to

Continue runningthe company;

Priority for debtor-in-possession (DIP)

Financin-gthis super-priority status has

Resulted in the evolution of a specialised

Market place where the DIP can borrow

Freshfundsto continue its business during

The restructuring; and

Limitationson contractualtermination

ProvIsions.

In addition, two sets of provisions that

Particularly help Insolvent companies to

Restructure allow the US Bankruptcy Court to

Reorganise the equity of an insolvent company

Without a vote of the shareholders and provide

For the Court to enforce a reorganisation plan,

Despite objections from some creditors (known

as 'cramdown provisions').

The absence of provisions equivalent to

SOme or all of the above in Europe both

Affects the economics of restructurings in

Europe and adds an onerous layer of

Complexity and transaction risk.

Read the whole article and decide whether these statements are true or false.

The authors argue that while reorganisations of insolvent companies are

Increasingly being carried out in Europe, the legislation in Europe does not

Provide a legal framework for these reorganisations.

In the USA, they try to save bankrupt companies rather than wind them up.

Under the early protection provision, it is necessary for a company to show

That it is insolvent before it can file for protection under the law.

The authors think that DIP powers are an advantage to insolvent companies,

As they permit an insolvent company to continue functioning during

Restructuring.

Chapter 11 does not allow the court to implement actions against the will of

a company's creditors.

Match these words or phrases (1-5) (italicised in the text) with their definitions

(a-e).

Legal regime

Date: 2015-12-11; view: 721