Global Insolvency and Bankruptcy Practice for Sustainable Economic Development: Vol 2, International Best Practice

285 Pages·2016·3.251 MB·English

by  Tarek M. Hajjiri, Adrian Cohen (eds.)

Global Insolvency and Bankruptcy Practice for Sustainable
Economic Development

Global Insolvency and
Bankruptcy Practice for
Sustainable Economic
Development
Vol 2, International Best Practice
Edited by
Tarek M. Hajjiri
Director of Legal Policy, United Arab Emirates
and
Adrian Cohen
Partner, Clifford Chance LLP, UK
© Dubai Economic Council 2016
Softcover reprint of the hardcover 1st edition 2016 978-1-137-56174-9
All rights reserved. No reproduction, copy or transmission of this
publication may be made without written permission.
No portion of this publication may be reproduced, copied or transmitted
save with written permission or in accordance with the provisions of the
Copyright, Designs and Patents Act 1988, or under the terms of any licence
permitting limited copying issued by the Copyright Licensing Agency,
Saffron House, 6–10 Kirby Street, London EC1N 8TS.
Any person who does any unauthorized act in relation to this publication
may be liable to criminal prosecution and civil claims for damages.
The authors have asserted their rights to be identified as the authors of this work
in accordance with the Copyright, Designs and Patents Act 1988.
First published 2016 by
PALGRAVE MACMILLAN
Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited,
registered in England, company number 785998, of Houndmills, Basingstoke,
Hampshire RG21 6XS.
Palgrave Macmillan in the US is a division of St Martin’s Press LLC,
175 Fifth Avenue, New York, NY 10010.
Palgrave Macmillan is the global academic imprint of the above companies
and has companies and representatives throughout the world.
Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries.
ISBN 978-1-349-56191-9 ISBN 978-1-137-56175-6 (eBook)
DOI 10.1007/978-1-137-56175-6
This book is printed on paper suitable for recycling and made from fully
managed and sustained forest sources. Logging, pulping and manufacturing
processes are expected to conform to the environmental regulations of the
country of origin.
A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Names: Hajjiri, Tarek M., author. | Cohen, Adrian, (lawyer), author.
Title: Global insolvency and bankruptcy practice for sustainable economic
development : international best practice / Tarek M. Hajjiri, Director of Legal
Policy, United Arab Emirates, Adrian Cohen, Partner, Clifford Chance LLP, UK.
Description: New York, NY : Palgrave Macmillan, 2015. | Includes bibliographical
references and index.
Subjects: LCSH: Bankruptcy. | Sustainable development – Law and legislation |
Economic development.
Classification: LCC K1375 .H34 2015 | DDC 346.07/8—dc23
LC record available at http://lccn.loc.gov/2015023523
Contents
Preface vi
Notes on Contributors ix
1 Overview of Corporate Restructuring and Insolvency
Law and Practice in England and Wales 1
Adrian Cohen and Gabrielle Ruiz
2 Role of Insolvency Practitioners in Restructuring and
Bankruptcy in the UK 4 9
Helen Smithson
3 Maximizing Enterprise Value and Minimizing “Hold Up
Value”: Reorganizations in the United States under
Chapter 11 of the US Bankruptcy Code 7 9
Mitchell A. Seider, Adam J. Goldberg and Christian Adams
4 The Role of US Judges and Courts in Enforcing US
Bankruptcy Law 1 18
Arthur J. Gonzalez , Esq.
5 The Effects of Business Insolvency on the Duties and
Liabilities of Directors and Officers – A Comparative
Analysis With Recommendations to Promote Good
Decision–Making 168
David S. Curry and Joseph U. Schorer
6 Global and Regional Practices in Financial Restructuring
and Bankruptcy Laws: Lessons to Be Learned
from Singapore 219
Andrew Chan
Index 2 65
Preface
There is a growing acceptance of the importance of legal reform in the
field of bankruptcy and restructuring law as a cornerstone to successful
economic and social advancement. This is evidenced by the increasing
rate of legal reform, over the past 10–15 years or so, across the globe,
whether implemented by jurisdictions influenced by civil or common
law, and whether in countries with mature or emerging economies. The
financial crisis of 2007–2008 and its aftermath merely served to act as a
catalyst to this trend and perhaps brought an added focus to bank reso-
lution and the need to address the systemic threat of bank failure to the
financial system.
How an economy handles financial and business distress has a
major impact on the confidence of business, which in turn determines
the availability of investment and cost of credit, which in turn drive
economic growth.
Bankruptcy tests a legal system to destruction. It takes a stakehold-
er’s rights – whether under contract, property, security, company or
employment law (the list is inexhaustible) – in each case subject to an
overlying legal framework designed to resolve the inherent conflict
between competing interests and produces a result often under extreme
stress. It gives rise to important questions: Does the bankruptcy regime
facilitate the turnaround of business where there is considerable enter-
prise value? Does it enable the efficient reallocation of capital where
there is little enterprise value left? Does it provide readily understood
rules for entrepreneurs, investors, employees, trade and financial
creditors? Does it provide for transparency and due process? And does
it provide, on the one hand, for appropriate sanctions, and on the
other, for the opportunity for rehabilitation? All of these questions
have to be addressed in turn against the backdrop of each jurisdiction’s
history, culture, tradition and social and economic needs. Having said
that, there is a also a great deal of international convergence, whether
through the adoption of the UNCITRAL Model Law on Cross-Border
Insolvency, the application of the EU Regulation on Insolvency and
other EU legislation, or simply through the adoption of similar prac-
tices at the domestic level, encouraged by international agencies
including, prominently, the World Bank.
vi
Preface vii
The origins of the twin volumes constituting Global Insolvency and
Bankruptcy Practice for Sustainable Economic Development lie in a far-sighted
conference hosted by the Dubai Economic Council in 2012, following
the financial crisis of 2009/2010 in the Gulf. The conference brought
together representatives from the key institutions of the United Arab
Emirates, as well as local practitioners and experts, including lawyers,
bankers, accountants and judges, from a number of key jurisdictions,
including the United States, England and Wales, and Singapore.
The conference produced a number of papers on a wide range of
subjects. These two volumes consist of chapters based on those papers,
reflecting the context in which they were given but edited and revised
to bring the content up-to-date.
Volume 1 focuses on general principles as well as practice within the
United Arab Emirates. Volume 2 focuses on international best practice.
Volume 1 starts with a chapter by Gordon Stewart, president of Insol
at the time of the conference, who sets the context with his exposi-
tion of the four pillars of regulatory framework principles. Jenny Clift
explains the history and application of the UNCITRAL Model Law on
Cross-Border Insolvency that has done so much to drive comity. Derek
Sach gives the perspective of a major UK clearing bank on the challenges
for financial institutions. Jose Garrido, of the World Bank, focuses on the
treatment of the insolvency of natural persons. Muddassir Siddiqui gives
a comparative study of Islamic Shari’ah principles with modern bank-
ruptcy regimes. James Farn, a local practitioner with Hadef & Partners,
describes bankruptcy in the UAE, and Sir Anthony Evans describes the
legal infrastructure of the DIFC Courts.
Volume 2 has chapters on English, US, and Singaporean law. The first
chapter, by Adrian Cohen and Gabrielle Ruiz, provides an overview of
corporate restructuring and insolvency in England and Wales. Hani
Bishara of Ernst & Young describes the role of insolvency practitioners in
the UK. Mitchell Seider, Adam Goldberg and Christian Adams of Latham
& Watkins describe the reorganisation process in the United States under
Chapter 11 of the US bankruptcy code. Judge Arthur Gonzalez, chief
judge for the US Bankruptcy Court, gives the perspective from the court-
room of enforcing US bankruptcy law. David Curry, a legal consultant
and attorney advisor to the commercial law development program of
the US Department of Commerce, and former partner at Mayer Brown
LLP, and Joe Schorer, of Kirkland and Ellis, provide a comparative anal-
ysis of duties and liabilities of directors and officers under US and UK
law. Finally, Andrew Chan, of Allen & Gledhill, provides the perspective
on financial restructuring and bankruptcy from Singapore.
viii Preface
As we are going into print, we understand that the UAE Cabinet has
approved a final draft of the new UAE federal bankruptcy law. Although
we have only been able to review an unofficial translation of a near
final draft, it appears that the law will introduce: (a) a new enhanced
protective composition regime; and (b) a twin track bankruptcy process,
encapsulating either: (i) rescue and restructuring within bankruptcy
proceedings; or (ii) formal liquidation procedures, in each case with
the inclusion of many useful features such as moratoria, ipso facto
provisions (which prohibit the use of insolvency triggered contractual
termination clauses in commercial contracts) and debtor in possession
financing, enabling a debtor to raise priority funding during a rehabili-
tation process. Importantly, the new law also fully embraces the inclu-
sion of accredited industry experts to oversee the new bankruptcy and
composition procedures and assist the court, which is a welcome and
pragmatic step.
As the existing UAE bankruptcy law was last updated in 1993, it is
indeed time for the law to be modernized, in order to keep pace with the
impressive growth and sophistication of the UAE economy in the inter-
vening years. It is hoped that the new law will provide a viable mecha-
nism for UAE companies to rehabilitate and restructure, promoting a
spirit of entrepreneurialism, whilst maintaining appropriate safeguards
for the rights of creditors.
The UAE government’s efforts to seek to integrate international best
practice into local legislation in order to promote a rescue culture are
highly commendable, and which will undoubtedly benefit the wider
UAE economy.
The editors sincerely hope that in each of the chapters, readers will
find insights will influence the future factors which have driven the law
reform agenda of recent years and into the direction of travel for legisla-
tive change in the UAE and elsewhere.
Finally, the editors would like to take the opportunity to thank Kara
Gouyez Benallal, a legal associate at the Dubai Economic Council, and
Gabrielle Ruiz, a senior lawyer at Clifford Chance, together with the staff
of Palgrave Macmillan, for all their hard work in helping to realize this
project.
Tarek M. Hajjiri and Adrian Cohen
Notes on Contributors
Christian Adams is an associate based in the Dubai office of Latham &
Watkins. Adams advises on a broad range of banking, finance and restruc-
turing matters. Adams was named a “leading lawyer” in the field of restruc-
turing and insolvency by Islamic Finance News in 2010, 2011 and 2012,
and assisted with Chapter 3.
Andrew Chan is a partner at Allen & Gledhill LLP, Singapore. Chan’s
practice encompasses commercial work, and he is a specialist in insol-
vency, dispute resolution (especially arbitration) and trusts. He acts as
counsel, arbitrator and expert, giving evidence in various foreign courts,
and he has been consistently noted as a leading insolvency and restruc-
turing lawyer in legal directories.
Jonathan Chan Tuan San was an associate at Allen & Gledhill LLP at
the time of writing and assisted with Chapter 6. His areas of practice
encompass litigation and restructuring and insolvency. He read Law at
the Singapore Management University as a juris doctor and was called to
the Singapore Bar in 2014. Prior to that, he graduated from the University
of New South Wales with a Bachelor’s degree in International Studies.
Melissa Coakley is a banking and finance lawyer at Clifford Chance LLP
specializing in cross-border restructuring and insolvency. Melissa was
seconded to the Clifford Chance Dubai office between 2010 and 2015,
during which time she worked on a number of high-profile regional
restructurings and refinancings. Prior to that she spent six years with
Clifford Chance in London, working on pan-European restructurings
during the global credit crunch. Melissa is a regular conference speaker,
most recently at the Arabian Business Forum and the Loan Market
Association Dubai training day. Melissa drafted the summary of the new
UAE federal bankruptcy law included at the end of the Preface.
Adrian Cohen is an English law-qualified, practising solicitor and
partner in the international law firm of Clifford Chance, LLP. He is a
member of the finance practice and specializes in the fields of restruc-
turing and insolvency law. He has been with the firm since 1990 and has
been a partner since 1998. Cohen specializes in all aspects of corporate
restructuring and insolvency law, advising sponsors, debtors, lenders,
commercial counterparties and insolvency officeholders. He co-heads
ix