Global Competition in Cross-Border Restructuring and Recognition of Centralized Group Solutions

47 Pages Posted: 28 Jan 2022

See all articles by Ilya Kokorin

Ilya Kokorin

Leiden University - Hazelhoff Centre for Financial Law and the Department of Company Law

Stephan Madaus

Martin-Luther-University Halle-Wittenberg

Irit Mevorach

University of Nottingham

Date Written: January 24, 2022

Abstract

Efficient administration of insolvency and restructuring proceedings in the context of enterprise groups faces many challenges. Distinct proceedings are typically opened with respect to group members. Coordination of such proceedings is complicated in an international setting. The lack of harmonization of national insolvency laws and the persistence of territorialistic inclinations may hamper the implementation of a coherent group-wide restructuring strategy. To reduce the risk of piecemeal liquidation and cut down the costs of running multiple proceedings concerning the same group of companies, a strategy of legal centralization is increasingly used. It can result in the concentration of proceedings concerning group entities in the same country or court, or in resolution of group distress via a single proceeding opened with respect to a group member, by extending restructuring effects to affiliated entities – co-debtors, guarantors, collateral providers – pursuant to so-called third-party releases.

In this paper, we (i) observe how various national legal regimes have gradually become an area for innovation or even competition for centralized group insolvency solutions, characterized by the rise of schemes and scheme-like procedures, (ii) explore whether this legal innovation is supported by a solid system of legal instruments at the international level (i.e. UNCITRAL Model Laws related to international insolvency), (iii) examine the “weak spots” in the current recognition regime, and (iv) share our ideas on its further development to accommodate centralized group restructurings and to promote “good” global competition in insolvency. We outline different ways of integrating schemes into the recognition regime, ranging from a complete departure from the requirement of COMI as a prerequisite to their recognition, to relaxation of rules related to COMI in a financial restructuring context, and to the adoption of a tailor-made international instrument for restructurings.

Keywords: enterprise group, insolvency, restructuring, schemes, recognition

JEL Classification: K10, K20, K33, K40, H12, G33, G34, L14, L22

Suggested Citation

Kokorin, Ilya and Madaus, Stephan and Mevorach, Irit, Global Competition in Cross-Border Restructuring and Recognition of Centralized Group Solutions (January 24, 2022). Forthcoming in the Texas International Law Journal, Vol. 56, 2022, Available at SSRN: https://ssrn.com/abstract=4016335 or http://dx.doi.org/10.2139/ssrn.4016335

Ilya Kokorin (Contact Author)

Leiden University - Hazelhoff Centre for Financial Law and the Department of Company Law ( email )

Steenschuur 25
Leiden, 2311 ES
Netherlands

HOME PAGE: http://https://www.universiteitleiden.nl/en/staffmembers/ilya-kokorin#tab-1

Stephan Madaus

Martin-Luther-University Halle-Wittenberg ( email )

Faculty of Law , Economics and Business
Universitaetsring 2
Halle/Saale, 06108
Germany

HOME PAGE: http://www.jura.uni-halle.de/lehrstuehle_dozenten/madaus/madaus/?lang=en

Irit Mevorach

University of Nottingham ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

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