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Not have an equivalent to the US practice ofcourt-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: 892
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