Harmonisation of European Insolvency Law and the Need to Tackle Two Common Problems: Common Pool and Anticommons

Insolvency law has finally become a field of law for which harmonisation at a European level is considered both important and feasible. In deciding upon the content of such harmonised rules, there will need to be a common understanding about the goals of insolvency law and, therefore, a European debate on bankruptcy theory. Bankruptcy theory, and most notably the influential creditors' bargain theory, has long viewed insolvency law as a set of rules for overcoming common pool problems. Bankruptcy theory thus far has almost completely overlooked anticommons problems. Anticommons present themselves in a situation in which there are several owners or entitled parties, and each of the parties has it within its power to block the use by others. Should anticommons behaviour in insolvency procedures go unchecked, creditors as a whole will be harmed. Insolvency is a collective process, and this process may not be sabotaged by a single party. Four typical insolvency issues, each identified by INSOL Europe as a candidate for harmonisation at a European level, are discussed, analysing them in terms of common pool problems and anticommons: preferences, reorganisation/composition plans, claim validation and insolvency of a group of companies. Copyright © 2012 John Wiley & Sons, Ltd.     

新《企业破产法》对银行信贷业务的影响及对策

相对于旧<企业破产法>而言,2007年6月1日施行的新<企业破产法>扩大了适用范围,明晰了破产条件,健全了破产法律责任追究制度,规定了跨境破产,调整了破产财产范围和债权的清偿顺序,新设了管理人、重整和撤销权等制度,新<企业破产法>的实施对银行信贷业务产生了重大影响.本文通过对新旧<企业破产法>进行比较,详细分析了新<企业破产法>的实施对银行信贷业务产生的影响,有针对性地提出了风险防范对策:正确选定融资对象,防范关联风险;严控贷款用途,关注借款及国家宏观调控政策的重大变化;全面掌握债务人财产状况;依法监督管理人行为等.     

Maritime cross‐border insolvency in China

Due to the high degree of mobility of ships and the special operational structures of shipping companies, it is difficult to harmonise the cross‐border insolvency regime with the maritime law regime governing ships. One of the typical examples is the recent bankruptcy of Hanjin Shipping Co Ltd. Chinese creditors were heavily affected by the bankruptcy of Hanjin. However, Hanjin never filed an application to have its Korean insolvency proceeding recognised in the People's Republic of China (PRC). Nor did it commence any ancillary insolvency application under the Enterprise Bankruptcy Law of the PRC. Taking Hanjin's bankruptcy as an example, this article examines the current statutory regime of cross‐border insolvency in the PRC in detail and analyses the approach adopted by the Chinese courts to resolve the conflicts that arise between the cross‐border insolvency and maritime law regimes.     

《公司法》修订与商业银行信贷债权的维护

新修订的《公司法》放宽了对公司设立与出资的管制，规范了公司的关联交易与对外担保行为，引入了法人人格否认制度，强化了对公司中小股东与债权人利益的保护。本文认为，在新《公司法》框架下，公司信用的基调已从静态的资本信用转向动态的资产信用。对此，作为公司债权人的商业银行，应当确立事前、事中和事后的不同措施，认真做好贷款管理和评价工作。商业银行必须关注客户公司内部治理和对外经营的动态变化，并分析这些变化对公司偿债资产的法律影响。在此基础上，商业银行应充分利用新《公司法》及其他相关法律赋予的权利，有效维护信贷债权。     

《公司法》修订与商业银行信贷债权的维护

新修订的《公司法》放宽了对公司设立与出资的管制,规范了公司的关联交易与对外担保行为,引入了法人人格否认制度,强化了对公司中小股东与债权人利益的保护。本文认为,在新《公司法》框架下,公司信用的基调已从静态的资本信用转向动态的资产信用。对此,作为公司债权人的商业银行,应当确立事前、事中和事后的不同措施,认真做好贷款管理和评价工作。商业银行必须关注客户公司内部治理和对外经营的动态变化,并分析这些变化对公司偿债资产的法律影响。在此基础上,商业银行应充分利用新《公司法》及其他相关法律赋予的权利,有效维护信贷债权。     

Dutch corporate insolvency law: On the brink of a revolution?

The Dutch Bankruptcy Code (DBC) has not changed fundamentally over the more than 110 years of its existence, at least as far as corporate insolvency proceedings are concerned. On 1 November 2007, however, a committee of insolvency experts presented a draft for an entirely new code to the Ministry of Justice. Whether this new code will gain the force of law and whether this will happen within the near future remains uncertain but the proposals will in any event dominate discussions on insolvency law in the Netherlands for the foreseeable future. The main goal behind many of the proposals is improving the ability to successfully restructure companies that experience financial difficulties. To this end the proposals include various measures that would weaken the position of (secured) creditors. The proposals include widening the scope of the cooling-off period during which secured creditors are unable to enforce their security by granting the administrator a right of use of assets subject to security interests. The ability to rely on early termination clauses in contracts is also reduced during the cooling-off period. The position of secured creditors is further weakened by a proposal to grant the right to sell assets that are subject to security interests to the administrator if he continues the business. Under the current bankruptcy code, secured creditors can largely ignore insolvency proceedings, there is no general stay on enforcement and, early termination clauses in contracts are generally thought to be valid and enforceable during insolvency proceedings. Although banks have already argued that weakening the position of secured creditors will limit the ability to restructure companies, it seems safe to assume that the relatively comfortable position that secured creditors currently enjoy during insolvency proceedings in the Netherlands will be under fire due to the proposals for a new bankruptcy code. Copyright © 2008 John Wiley & Sons, Ltd.     

Rethinking priority: The dawn of the relative priority rule and the new “best interests of creditors” test in the European Union

This article identifies one aspect of the cross‐class cram‐down from the EU Directive on restructuring and insolvency that has not drawn wide attention to date. In addition to giving EU Member States the option of a “relative priority rule,” the European legislator has introduced a new “best interest of creditors” test, which does not—like in Chapter 11 of the US Bankruptcy Code—use the value that a party could expect in a hypothetical liquidation as a comparator but refers to the “next‐best‐alternative scenario.” First, this article addresses the concepts of the absolute and relative priority rule from the Directive and explores the motives for introducing the relative priority rule. In particular, a demand for more flexibility in restructuring negotiations, the call for an instrument to overcome structural hold‐out positions of preferential (priority) creditors in some Member States, as well as a trend in Europe to break with the “traditional laws of insolvency law” of law and economics seem to have inspired the legislator in drawing up the relative priority rule. This article then deals with the new “best interest” test and examines its interaction with the relative priority rule. It is shown that the concept of combining the new “best interest” test with the relative priority rule is coherent in theory. However, this article remains skeptical as to whether this interaction can succeed in practice, as the new “best interest” test is likely to add another stress point to the negotiations of restructuring plans.     

Cross-border insolvency law in India: Are the principles of comity of courts and inherent common law jurisdiction relevant?

Deliberations are in the final stages for enacting a cross-border insolvency law in India based on the UNCITRAL Model Law on Cross Border Insolvency 1997 (‘Model Law’). The cross-border insolvency regime in India will provide an avenue for recognising foreign insolvency proceedings in India. Although it is a matter of time before India adopts the Model Law, it is important to examine whether there remains an independent basis in addition to the Model Law for recognising and providing assistance to cross-border insolvency proceedings in India. This is crucial on account of the following reasons: first, the Model Law does not provide that it is the exclusive pathway for foreign creditors to seek remedies under domestic law. The Model Law, as reflected in Article 7, was intended by its drafters to be an additional gateway to those provided under local laws. The proposed Indian law in Article 5 of Draft Part Z of the Insolvency and Bankruptcy Code 2016 also does not depart expressly from this principle. Second, there may be instances where neither the ‘Centre of Main Interests’ nor an establishment of a corporate debtor is situated in India; therefore, assistance and cooperation in respect of such cross-border insolvency proceeding can only be based on the inherent common law jurisdiction, if available. Third, the cross-border insolvency framework in India will be premised on the requirement for reciprocity and, therefore, countries that do not meet the reciprocity requirement may find it beneficial if such an independent basis for recognition exists in India. This article argues that foreign representatives should be encouraged to explore the possibility of seeking assistance from the commercial courts in India under the common law principles governing cross-border insolvency and that the courts in India should be open to this possibility.     

The ancillary insolvency proceeding

The main legal acts on International Insolvency Law (the European Regulation, the UNCITRAL Model Act and the European Convention on Certain International Aspects of Bankruptcy) lay down several local proceedings with substantive effects as regards the debtor, the distribution of proceeds and the ranking of claims. These—full—proceedings are characterized by a high degree of unpredictability and prove to be inadequate for creditors. These are the reasons why, as an immediate solution, the existing insolvency rules should be reinterpreted according to a certain logic of the market. However, such revision would only partially and provisionally solve the inconveniences of the current model. The true and ‘unsolvable’ problem is that even though the full local proceeding is based on international assistance, it alters the substantive insolvency rules. Therefore, in future it would be necessary to create a truly ancillary proceeding. Such a proceeding would not have any substantive effect as regards the debtor, the creditors and third parties, nor would it require any kind of distribution of proceeds and ranking of claims. However, this proceeding would enable to provide procedural assistance to foreign courts and procedural protection to local creditors. Copyright © 2010 John Wiley & Sons, Ltd.     

Asset Sales and Secured Creditor Control in Restructuring: A Comparison of the UK,US and Canadian Models

The primary insolvency restructuring mechanism in the UK is administration under the Insolvency Act 1986, as amended by the Enterprise Act 2002. In an administration, an insolvency professional known as an administrator, who is accountable to the insolvent company's creditors as a whole, is appointed to oversee the restructuring. The administration process was designed to rehabilitate distressed but viable companies and businesses and to maximize creditors' recoveries. Increasingly, however, insolvent companies are using this process to sell substantially all of their assets through pre‐packaged administrations or ‘pre‐packs’. In a pre‐pack, the insolvent company and its senior creditors negotiate the terms of the sale prior to initiating administration proceedings and appointing an administrator. The administrator then implements the deal, often with little or no input from junior creditors or other stakeholders. Both the US Bankruptcy Code and the Companies' Creditors Arrangement Act in Canada permit insolvent companies to sell substantially all of their assets under the auspices of the restructuring legislation. This article compares pre‐packs with these US and Canadian processes, arguing that they are all functionally equivalent in that they facilitate quick realizations for secured creditors by bypassing traditional restructuring processes. This analysis suggests that pre‐packs may give too much control over the restructuring process to secured creditors, encouraging rent‐seeking and other value‐destructive behaviours that undermine the fundamental goals of insolvency law. Copyright © 2017 INSOL International and John Wiley & Sons, Ltd.     

Resaleable debt and systemic risk

Many debt claims, such as bonds, are resaleable; others, such as repos, are not. There was a fivefold increase in repo borrowing before the 2008–2009 financial crisis. Why? Did banks’ dependence on non-resaleable debt precipitate the crisis? In this paper, we develop a model of bank lending with credit frictions. The key feature of the model is that debt claims are heterogenous in their resaleability. We find that decreasing credit market frictions leads to an increase in borrowing via non-resaleable debt. Such borrowing has a dark side: It causes credit chains to form, because, if a bank makes a loan via non-resaleable debt and needs liquidity, it cannot sell the loan but must borrow via a new contract. These credit chains are a source of systemic risk, as one bank’s default harms not only its creditors but also its creditors’ creditors. Overall, our model suggests that reducing credit market frictions may have an adverse effect on the financial system and even lead to the failures of financial institutions.     

The Empirical Studies of China's Enterprise Bankruptcy Law: Problems and Improvements

Over the past 9 years since the implementation of China's Enterprise Bankruptcy Law in 2007, it has contributed to some measures of regulating market practice and rearrangement of market resources and has become an integral part in an improved legal system of China's market economy. However, a closer look at the effect of implementing the Enterprise Bankruptcy Law shows that the number of bankruptcy cases after its implementation, instead of increasing, has taken on a trend of decreasing. Even under the influence of the 2008 financial crisis, no significant increase in the number of Chinese bankrupt enterprises means that China's Bankruptcy Law failed to play its due role, leaving a large gap as desired. As such, this article aims to examine the problems arising from the implementation of the Bankruptcy Law and, taking this as guidance, probe into the reasons hidden behind and propose possible improvement measures. It is expected that the Bankruptcy Law would increasingly play a key role in the development of China's market economy, particularly under the current situation where Chinese government proposes to clean up zombie businesses. Copyright © 2018 INSOL International and John Wiley & Sons, Ltd.     

The effect of sovereign wealth funds on the credit risk of their portfolio companies

We study how sovereign wealth fund (SWF) investments affect the credit risk of target companies as measured by the change in their credit default swap (CDS) spreads around the investment announcement. We find that the CDS spread of target companies decreases, on average, following an SWF investment. The reduction in the CDS spread is higher when the SWF is established by a politically stable non-democratic country that has a neutral political relationship with the host country of the target company. Our results suggest that creditors expect SWFs to protect target companies from bankruptcy when it is in the interest of their home country to build political goodwill in the host country of the company.     

税收优先权质疑

《中华人民共和国税收征收管理法》明确规定,税收优先于一般债权。然而,如果将税收法律关系置于债的关系中去研究就会发现,无论从理论基础、法律依据还是实际操作等方面,都很难得出税收应当优先于一般债权的结论。     

Italian government debt and sovereign credit risk: an empirical exploration and some thoughts about consequences for European insurers

The current sovereign debt crisis in the Euro-Zone is a cause of major concern for European insurers. Especially the fears about increased sovereign credit risk in Italy??leading to higher risk premia??may result in major difficulties because many insurance companies have invested in Italian government bonds. Therefore, this paper examines the relationship between German and Italian government bond yields using techniques of cointegration analysis. Furthermore, implications for insurance companies and regulators (focussing on Solvency II) are discussed.     

Private credit in 129 countries

We investigate cross-country determinants of private credit, using new data on legal creditor rights and private and public credit registries in 129 countries. Both creditor protection through the legal system and information-sharing institutions are associated with higher ratios of private credit to gross domestic product, but the former is relatively more important in the richer countries. An analysis of legal reforms shows that credit rises after improvements in creditor rights and in information sharing. Creditor rights are remarkably stable over time, contrary to the hypothesis that legal rules are converging. Finally, legal origins are an important determinant of both creditor rights and information-sharing institutions. The analysis suggests that public credit registries, which are primarily a feature of French civil law countries, benefit private credit markets in developing countries.     

Trade credit,creditor protection and banking crisis

This paper analyzes the effect of banking crises on the trade credit provided to customers and whether this effect depends on the strength of a country's legal protection of creditors. The results indicate that trade credit extensions increase in times of crisis, although this increase is smaller in countries where creditors are well protected; however, no differences are observed in trade credit extensions between countries with weak and strong creditor protection in non-crisis periods.     

“Too big to fail”? The Agrokor case and its impact on West Balkan economies

From about April 2017, Agrokor became the main economic topic in the Balkans. Once the greatest pride of the Croatian economy, it became a serious problem for its government. Its systemic importance for the country and the region required an immediate legislative solution. The Government had Parliament pass a special law intended to save this company. The special law on the procedure of extraordinary administration in companies of systemic importance adopted in April 2017 is an interesting example, because it introduced a new insolvency procedure titled “extraordinary administration” clearly following the example of the Italian Legge Marzano, which was adopted in order to save the Parmalat group in 2003. It also represents an example of a collision of legislation in the case of cross‐border insolvency proceedings inside and outside of the European Union, where different jurisdictions have diverging standpoints on the question of its recognition as a foreign insolvency procedure. However, once the rescue proceedings began, numerous (and some dubious) interests of the different stakeholders came to the light. The government tried not only to rescue the company and its assets throughout the Balkans region but also to acquire control of it. This was especially visible through the prerogatives of the extraordinary commissioner, formally appointed by the court, but in fact a government official. Creditors at risk, mainly Russian and Italian banks, filed lawsuits to prevent the selling of the debtor's assets. At the end, the majority creditors called to vote on the settlement agreement became the new owners of the company. However, Agrokor is still far from the end of the crisis. It has more than 60,000 employees in the region and their destiny depends on the outcome of the crisis. In more recent times, the case also revealed major political scandals.     

China's new Enterprise Bankruptcy Law—A great leap forward,but just how far?

The closure of many small and medium enterprises (SMEs) following the global financial crisis of 2008 spurred the Chinese government to follow its international counterparts in issuing an economic stimulus package. While it was effective in preventing many financially distressed SMEs from failure by boosting demand for its businesses, in the long run, such SMEs should be rescued through a statutory regime, which affords them temporary protection from creditors and provides them an opportunity to restructure their businesses. In doing so, the premature liquidation of SMEs would be prevented and SMEs with viable businesses but in temporary financial difficulties would be given a chance to succeed again. Although China's new Enterprise Bankruptcy Law (EBL) has shortcomings, it improves upon its predecessor legislation and, since it is still at an infantile stage of development, is bound for further reform. Despite the EBL's success in bringing Chinese corporate bankruptcy laws in line with international standards, full compliance with the UNCITRAL Model Law on Cross‐Border Insolvency and UNCITRAL Legislative Guide on Insolvency Law remains to be seen. In September 2008, the South China Morning Post newspaper reported that the number of (applications for) corporate reorganization and bankruptcy cases had dropped, “leading to widespread speculation there are problems in the law's practical application”. 1 This article examines the implementation of the EBL, critiques key aspects of the EBL and argues for a comprehensive assessment of the EBL and for bringing the EBL in full compliance with the international standards on cross‐border insolvency. Copyright © 2010 John Wiley & Sons, Ltd.     

存款保险机构代位受偿优先权立法探究

存款保险机构代位受偿优先权是指存款保险机构基于法律规定在赔付了存款人的存款损失后,其取得的代位求偿权相对于一般债权人所具有的优先受偿的权利。它源自美国1993年《综合预算协调法》中的“国民存款人优先”条款,是上个世纪80年代美国银行业危机的产物。赋予存款保险机构代位受偿优先权有利于存款保险基金的安全和稳定,更好地发挥存款保险制度所具有的保护存款人利益、维护金融稳定等职能。从法理角度考察,存款保险机构代位受偿优先权具有坚实的法理基础。我国有必要借鉴美国的立法经验,赋予我国存款保险机构代位受偿优先权。赋予我国存款保险机构代位受偿优先权与我国现行法的思想与规定具有兼容性,但还需要与我国现行的《商业银行法》和《破产法》协调。