On Decision-Making in Rescue Cases: Why Creditors and Shareholders Should Decide About a Rescue Plan
Santen/van Offeren (Eds.), Perspectives on International Insolvency Law. A Tribute to Bob Wessels, 2014, pp. 215-228
12 Pages Posted: 26 Aug 2015
Date Written: January 9, 2014
Recently, at a conference on restructuring law and practice in Germany, I had a conversation with a German insolvency judge about new rescue options in German business failures after the reform of the Insolvency Code in 2012. Arousing a great deal of interest from insolvency practitioners involved in rescuing companies with “umbrella proceedings” (Schutzschirmverfahren, § 270b InsO), the judge expressed great concern about the quality of many of the rescue plans that he had seen and been asked to confirm. In his view, many of them have seemed overly optimistic, rendering creditor’s money vulnerable instead of allowing for a sustainable investment in a promising rescue despite every plan having gained the required support by a majority of creditors and shareholders. When I enquired as to how he could feel so convinced about this view in contrast to the parties more directly involved, he referenced his 15 year experience as an insolvency judge with assuredness.
The claim made in this brief conversation hits the very heart of modern insolvency law, as it is widely accepted that creditors (and shareholders, if impaired) should negotiate and decide on a proposed rescue plan for an insolvent or near insolvent company, while the court’s task is to confirm a plan in order to bind dissenting minorities. But if insolvency experts know better whether a proposed plan could work, shouldn’t they be asked instead? Would it not seem wise to direct this question to widely recognised experts in international insolvency law, experts who can reflect on dozens of previous rescue cases to assess a proposed plan in comparison to creditors and shareholders who may be facing such situations for the very first time? We could thereby ask Bob Wessels, for instance, to utilise his unique expertise to decide on rescue plan proposals in the Netherlands, Europe or wherever else he may be required. This article will demonstrate that there is good reason to vote on a plan instead of asking a single expert. It is the nature of both the decision regarding whether to accept or reject rescue plans and the probable accuracy and acceptance of such decisions made by an expert instead of the group of creditors and shareholders involved that make a convincing case for the modern voting rules, though room for improvement will also be noted.
Suggested Citation: Suggested Citation