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The Quarterly Journal of INSOL International US$25

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Intelligent and insightful offshore legal advice and services.Delivered with perspective.

RESTRUCTURING & INSOLVENCY | FRAUD & ASSET TRACING | CORPORATE DISPUTES

Andrew Bolton | Global Group Head | [email protected] Eliot Simpson | Group Head, Asia | [email protected] Gilbert Noel | Group Head, Middle East & Africa | [email protected]

applebyglobal.comPhotograph from Daily Overview | Satellite images (c) 2015, DigitalGlobe, Inc.

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3INSOL World – First Quarter 2016

In this issue we focus principally on significant developments inAfrica, the Middle East, Asia and India.

Adam Harris has provided a report on the Africa Round Table thattook place in Cape Town in 2015. This is a project jointly run byINSOL and the World Bank. The Round Table discussed a widerange of important topics including SMEs, secured lending, bankinsolvencies and the role of the judiciary (Mr Justice Norris from theChancery Division in London chaired a judicial panel – hisinvolvement demonstrates the commendable commitment of thejudiciary from major jurisdictions to support and engage in dialoguewith other judges from around the world). The Round Table alsodiscussed, and we have a separate article written by AntoniaMenezes and Will Paterson of the World Bank Group on, thesignificant and impressive work of the Organisation for theHarmonisation of Business Law in Africa (OHADA), with invaluableadvice from the World Bank Group, in developing and passing a revised Uniform Act on Insolvency which includes theUNCITRAL Model Law. The Act will enter directly into force in the seventeen African countries that are members of OHADAand will be given a uniform construction by a single court which will hear final appeals involving interpretation of the legislation.

A number of articles consider the need and proposals for the reform of insolvency law in the Middle East. Roger Phillips andJo Rolls review the Qatari insolvency system – both the civil law based system of the State of Qatar and the common lawregime of the Qatar Financial Centre. Louise Verrill, Nicholas Tse and Ravinder Thukral then consider the UAE insolvency law(and the new draft law) and also the special regime established to deal with the Dubai World restructuring. Both articles notethe inadequacies of the domestic regimes and highlight the significance of local courts sitting in the Middle East and Asia(see also the developments in Abu Dhabi and Singapore) which operate outside the domestic jurisdiction, apply commonlaw rules and are staffed by hugely experienced judges who have previously sat in the UK or other jurisdictions.

Reform in Hong Kong is also discussed. A draft bill was produced in October last year and its merits and weaknesses areconsidered in an article by Stephen Briscoe. And the significant new decision of the Court of Final Appeal in Re Yung Keeis reviewed by Wynne Mok and Michel Chik. The judgment was handed down in November and written by Chief JusticeMa and Lord Millett. The case concerned a contributory’s winding-up petition in respect of a BVI company and whether toapply the same test as that applied to creditors’ petitions relating to foreign companies. The Court held that the same testshould be applied. The case raises an interesting point of principle (to what extent should contributories be bound by orsignificant weight given to the contractual choice of forum arising from the company’s constitution and the shareholders’decision to incorporate or invest in the place of incorporation?) and of practice (if contributories can easily obtain a windingup in Hong Kong will they feel less need for a winding up in the offshore jurisdiction of incorporation?). The use ofproceedings in the offshore jurisdictions (light touch provisional liquidations) to restructure Bermudian and Caymaniancompanies with a Hong Kong listing is discussed by Ian Mann, Sarah-Jane Hurrion and Marc Kish.

Asian developments are also considered in an article on the use of Indonesian schemes of arrangement in the Berlian LajuTanker case (by Sushil Nair and Mohan Gopalan) and the impact of recent economic and financial developments onSingapore (by Ashok Kumar and Darius Tay Kang-Rui).

Law reform in India is also considered in an article by Ameeta Trehan (a bill has very recently been introduced in the LokSabha as the Insolvency and Bankruptcy Code 2015).

We also have articles on the rise and significance of third-party litigation funding by Rein Phillips and the recentamendments to the Spanish rules governing the liquidation of concessionaire companies by Marta Vizcaino andBernardino Muniz.

I would like to take the opportunity to thank the following members of the Editorial Board, whose term of office came to anend in December 2015 and especially David Kidd, Linklaters (Co-Editor) for his input over the past two years – AaronBielenberg, McKinsey & Company; Mark Bloom, Greenberg Traurig LLP; Juanitta Calitz, University of Johannesburg; TimothyLe Cornu, Fellow, INSOL International, KRyS Global; David Molton, Fellow, INSOL International, Brown Rudnick and FranciscoSatiro, University of Sao Paulo. And our warm welcome to new members: Andre Boraine, University of Pretoria; GiulianoColombo, Pinheiro Neto Advogados; Jeremy Garrood, Carey Olsen; Pedro Jimenez, Jones Day; Sushil Nair, Drew & NapierLLC; Jody Glenn Waugh, Al Tamimi - and in particular to Ken Coleman, Allen & Overy LLP, who joins me as Co-Editor.

As always I would like to conclude by expressing our thanks to Mourant Ozannes for sponsoring INSOL World and to DavidRubin & Partners for sponsoring the monthly Technical Electronic Newsletter.

BVI | CAYMAN ISLANDS | GUERNSEY | HONG KONG | JERSEY | LONDON

Leading offshore law firm Mourant Ozannes advises on all aspects of complex insolvency related litigation and corporate restructurings, providing pragmatic and workable solutions for clients. To find out more visit mourantozannes.com

Local expertise. International reputation.Sponsor of INSOL World

Editors’ Column

Nicholas SegalFreshfields BruckhausDeringer LLP, UK /Judge, Cayman GrandCourt, Cayman Islands

Ken ColemanAllen & Overy LLP, USA

Dear Friends and Colleagues,

Australia’s insolvency and restructuring laws tosupport innovationI am delighted to confirm that Australia has recently awokenfrom its insolvency and restructuring law reform slumberand will work to introduce laws that bring the country intoline with the rest of the developed world, by favouringgenuine entrepreneurship over punitive measures. Insummary, important changes to the law will encompass:

• The introduction of a safe harbour regime to protectdirectors from personal liability for insolvent trading, ifthey have engaged a qualified restructuring advisor;

• The suspension of ipso facto (i.e. contract termination)clauses in voluntary administration and schemes ofarrangement;

• The introduction of a ‘pre-positioned’ sales mechanism,similar to the United Kingdom’s long-standing ‘pre-pack’ regime;

• With respect to personal insolvency laws, therestrictions applicable to bankrupts will only apply forone year.

The reforms were picked up in the Government’sInnovation Statement announced on 7 December 2015. Ithank the Australian Restructuring Insolvency andTurnaround Practitioners Association (ARITA) for theirtireless work over a number of years advocating lawreform, supported by the efforts of a number of Group of36 firms and individual INSOL members.

INSOL Lenders GroupI am pleased to report that the INSOL Lenders Group hasgrown to include more investment banks and hedge fundsfrom various regions, and that their vital work on updatingthe seminal INSOL publication ‘Statement of Principles for a Global Approach to Multi-Creditor Workouts’ isprogressing well. The Lenders Group intend to produce adraft of the updated Statement of Principles for discussionat INSOL Dubai in January 2016.

Taskforce 2021It is also my pleasure to confirm that the Taskforce’sstrategic review of INSOL International is proceeding toplan. An important current piece of work is to flesh out theprocesses to connect with INSOL’s key stakeholdersincluding (but not limited to) Member Associations, theGroup of 36, individual members and INSOL staff - tostart to draw out what they are thinking, what concernsand issues they have, and ideas that they may have to helpadvance INSOL.

The INSOL Dubai conference in January 2016 will providean important avenue to further inform our members andstakeholders of the Taskforce’s progress and timeline, andto obtain some of the information sought.

Asia Pacific RimOne of INSOL International’s and my aims is to grow itspresence in the Asia Pacific Rim. Accordingly, on 30November 2015 Claire Broughton (Executive Director,INSOL International) and I met with the Board of theInsolvency Practitioners Association of Singapore (IPAS).As anticipated, it was a very informative and fruitfulmeeting that encompassed a number of issues includingmembership growth, progress drafting their newinsolvency law, steps towards adopting the UNCITRALModel Law and plans to make Singapore the biggest Asiahub for restructuring, workout and insolvency.

Whilst in Singapore we also met with a number of seniorprofessionals who regularly practice in Indonesia. Therewas strong support for INSOL to conduct a trainingseminar in Indonesia because there is currently significantinsolvency related activity impacting businesses andassets located in the country.

South African Restructuring and InsolvencyPractitioners Association (SARIPA) - AnnualconferenceTogether with Adam Harris, Vice President, INSOLInternational, I attended the SARIPA annual conference inJohannesburg, 26 to 27 November 2015. Over 300delegates attended (an outstanding effort) and they werefully engaged. Given generally poor economic conditionsand the practical implementation by directors of

President’s ColumnBy Mark RobinsonPPB AdvisorySydney, Australia

4

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INSOL World – First Quarter 2016




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distressed companies of the relatively new businessrescue legislation, the restructuring and insolvencycommunity in South Africa is relatively buoyant. The issuesarising from this environment were actively discussed anddebated at the conference. In summary it was an excellentconference by any standard.

INSOL 2017 – Sydney Congress plans step up a gearPlanning is well under way for INSOL’s Tenth QuadrennialCongress which will take place in March 2017 against thedramatic back-drop of Sydney’s Darling Harbour, currentlybeing transformed into one of the most distinctive anddynamic new waterfront, business and leisure districts inthe world.

We look forward to welcoming accountants, lawyers,turnaround experts, judges, regulators, academics,lenders and alternate capital providers from around theworld to the Congress, where our technical programmewill support our members’ roles as leaders in internationalturnaround, insolvency and related credit issues.

We have a number of sponsorship opportunities availableand if you would like further information please contactClaire Broughton, Executive Director, INSOL Internationalon [email protected]

Looking aheadI look forward to catching up with as many of you as I canat the following events. Please look out for me:• Dubai - INSOL Dubai – 24 to 26 January 2016• Delhi - India One Day Seminar – 23 April 2016• New York - Group of 36 Reception – 5 May 2016• Budapest – R3 Conference – 18 to 20 May 2016

If you would like to drop me a line, please do so througheither my LinkedIn account at https://au.linkedin.com/in/markjulianrobinson or my email [email protected]


IN THIS ISSUE: page

Editors’ Column 3

President’s Column 4

Focus: Asia & Middle East 6-24An Overview of the Qatari Insolvency System 6

INSOL Dubai 8

Bankruptcy Law Reform – a New Horizon 10to Corporate Insolvency in India

Hong Kong’s Law Reform - A Missed Opportunity 12

G36 Feature: 14Hong Kong’s Highest Court Allows Winding Up of a 14Foreign Company on the Just and Equitable Ground

The New UAE Insolvency Law - 16Where Are We Now?

INSOL 2017 16

Singapore – the Eye of the Storm? 18

The Restructuring of Berlian Laju Tanker 20

Ian Strang Founders’ Award 22

Fellowship Feature: 23“Light Touch” Restructuring Provisional Liquidator: 23Cross-Border Rehabilitation of Bermuda and Cayman Islands Companies Listed in Hong Kong

The Rise of Third-Party Litigation Funding 24

INSOL Board Directors 25

INSOL Africa Round Table 2015 26

One Insolvency Law, Seventeen Countries:A Brief Overview of the Revised OHADA Uniform 28 Act on Insolvency

INSOL International PRC Half Day Seminars 2015 31

New Rules for the Liquidation of Concessions 32Awarded to Companies that become Insolvent

Richard Turton Award 2016 33

Small Practice Feature: 34Remuneration of Officeholders: 34Some International Comparisons

INSOL Taskforce 2021 – Working together 35to create the future strategy of INSOL

INSOL International College of Mediation 36

INSOL International Academics’ Group: 36INSOL Academics’ 18th Colloquium 36

Book Review 37

Conference Diary 38

Member Associations 38

INSOL World Editorial Board 2016

Co-EditorsKen Coleman, Allen & Overy LLP, USA

Nicholas Segal, Freshfields Bruckhaus Deringer LLP, UK / Judge,Cayman Grand Court, Cayman Islands

Editorial BoardAndre Boraine, University of Pretoria, South AfricaStephen Briscoe, Briscoe Wong Advisory, Hong KongGiuliano Colombo, Pinheiro Neto Advogados, BrazilJeremy Garrood, Carey Olsen, Channel IslandsFernando Hernandez, Marval, O’Farrell & Mairal, ArgentinaPedro Jimenez, Jones Day, USABernardino Muniz, Hogan Lovells, SpainAllan Nackan, Fellow, INSOL International, Farber Financial Group, CanadaSushil Nair, Drew & Napier LLC, SingaporeLee Pascoe, Fellow, INSOL International, Libero Legal, AustraliaBob Rajan, Alvarez & Marsal, GermanyAndrew Thorp, Harneys, BVIJody Glenn Waugh, Al Tamimi & Company, UAE

Editorial comments or article suggestions should be sent to Jelena Sisko [email protected] .

For advertising opportunities and rates contact Christopher Robertson [email protected] .

www.insol.org


https://au.linkedin.com/in/




http://www.insol.org

6 INSOL World – First Quarter 2016

Focus: Asia & Middle East

BackgroundQatar is among the strongest economies in the GCC, but thestart-up and operational costs of doing business are high,putting increasing pressure on enterprises and potentiallyleading to more financial distress and insolvencies.Increased competition, the saturation of certain businesssectors and inflationary pressures are bound to exacerbatethe number of failures in the run up to the World Cup.

In common with other Gulf states, Qatar originally adopteda comprehensive civil law legal system including somebankruptcy rules and systems. Formal bankruptcy lawswere low profile and rarely used given the continuingeconomic growth in Qatar and cumbersome andexpensive Court processes. In recent years, there havebeen very few cases in the Qatar Courts. Most often,informal arrangements were negotiated with creditors forclosing down businesses. Lending risk became more highprofile after the financial crisis in 2008, with more attentionbeing focused on insolvency laws.

Qatar: Two Legal FrameworksQatar has two quite different legal jurisdictions: the Stateof Qatar framework and the common law regime of theQatar Financial Centre (‘QFC’). The QFC is an ‘onshore’jurisdiction with companies and businesses establishedthere able to conduct business outside the QFC with Stateentities under QFC-applicable laws and regulations,although State criminal laws always apply. The interactionof QFC Laws with other State laws is governed by Article18 of the QFC Law. When businesses fall into financialdifficulty, the QFC and State systems deal with insolvencyissues in different ways. We provide an overview of each.

1. Qatar State regimeTrading Law and laws of bankruptcyThe State system has no specific insolvency laws. Suchmatters are dealt with under the ‘Trading Law’ (Law No.27 of2006). Very few cases have been tried before the courtsunder this regime. Court pleadings must be in Arabic. Tradersmay be declared bankrupt when their financial affairs are indifficulty and they cease to pay their commercial debts.Declarations of bankruptcy can only be made by the Qatarcourts. A trader, creditor or the Public Prosecutor can ask thecourt to make a bankruptcy order. Creditors makinggroundless requests may suffer financial penalties.

The bankruptcy commences when the court appoints an

administrator, who must manage the debtor’s affairsand property and has authority to act on their behalfin all matters, including taking all necessary steps toadminister and safeguard the assets.

Effects of declaration of bankruptcyA declaration of bankruptcy has a significantimpact. The bankrupt cannot be a voter ormember of the Shura Council, Central MunicipalCouncil or the Chamber of Commerce andIndustry of Qatar, nor be a director of orparticipate in the management board of anycompany. They cannot act as a commercial agent,be involved in export and import or brokerage in

the sale or purchase of securities or sale by auction, normay they represent others in the management of theirproperty. They are prohibited from dealing with their ownproperty and cannot discharge or collect their debts.

A company may also be declared bankrupt if the state ofits finances require it and it cannot pay its debts as they falldue. This does not apply to joint ventures, professionalfirms and state-owned enterprises engaged in operating apublic utility. A partner of the company may apply for theadjudication of bankruptcy, provided they are also acreditor. A company manager or its liquidator may onlyapply after obtaining consent from the majority of partners(in a partnership company), consent from members at anExtraordinary General Assembly or partners association inother companies.

When a partnership company is declared bankrupt, all itsjoint partners will be declared bankrupt. This includespartners who left the company after it ceased meeting itsliabilities, if the bankruptcy was declared within two yearsof the partner’s name being removed from the company’scommercial registration.

If it is found that the company has insufficient assets to payat least 20% of its debts, the court may order some or all ofits management board, directors and managers, jointly andseverally to pay all or some of the company’s debts. Thedefence is to establish that they exercised reasonable duediligence in managing the company’s affairs.

Criminal penaltiesThe Trading Law also stipulates that criminal penalties canbe ordered if the bankrupt is found to have actedfraudulently or negligently. Members of the company’sBoard, its managers, directors or those responsible for thecompany liquidation may also be subject to criminalpenalties if they are held to have played a part.

The bankrupt may ask the Court to terminate thebankruptcy where it is established that it has paid allcreditors who registered their debts or has deposited withthe receiver the sums required to pay these debts.

2. QFC SystemNew legal framework derived from English lawTraditionally, QFC firms have been dominated by financialand professional services companies. Increasingly, morediverse business-types are setting up there. To attract

An Overview of the Qatari Insolvency System

By Roger PhillipsPinsent Masons LLP,Qatar Financial Centre,Doha, Qatar andJo RollsOpus Restructuring LLPLondon, UK


international businesses to Qatar, the Emir enacted aspecific common law framework in 2005 granting the QFCits own regulations similar to the UK legal system. It has itsown Court and dispute resolution centre, the QatarInternational Court and Dispute Resolution Centre(‘QICDRC’) with international judges presiding. Someinsolvency proceedings have been issued in the QICDRC,so useful precedents are emerging.

The QFC Insolvency Regulations 2005 (“Regulations”)govern the insolvency of companies within the QFC andare reasonably comprehensive, providing for admin-istration and either voluntary or compulsory winding up.They have been examined by the QICDRC in the case ofQatar Financial Centre Authority and Silver Leaf CapitalPartners LLC involving application for a winding up order.The Court highlighted that where there was a requirementto interpret the QFC Regulations, it should be recognisedthat they derive ‘from concepts that formed part of the lawof England and other common law countries’ and that theprinciples developed in those countries provided ‘usefulguides to the interpretation of the Qatari legislation’.

AdministrationUnder the Regulations, the company or its directors, acreditor or the QFC Authority may apply to the QICDRC foran administration order. The appointment is published inappropriate newspapers, with notice being sent to allcreditors and the QFC Companies Registration Office(“CRO”). The powers of administrators are wide-ranging.

The administrator must submit a statement of hisproposals to the CRO and creditors. If the administratorand creditors cannot agree on a set of proposals for the company, the QICDRC has various powers ofintervention including approving a proposal for winding up the company. The administrator and the creditors may enter into an arrangement in respect of a composition in satisfaction of the company’s debts. This

arrangement, if agreed, is binding. A creditors’ committeemay be established by the creditors to assist theadministrator.

Liquidation The winding up of a company under the Regulations may beeither voluntary or compulsory by order of the QICDRC. Anyofficer of the company failing to cooperate with orobstructing the liquidator is liable to a financial penalty.

Voluntary winding upA company may be wound up voluntarily as provided in itsArticles, by company resolution or where it cannot byreason of its liabilities continue its business. A voluntarywinding up commences at the time of the passing of thecompany resolution for winding up. The company andpowers of the company continue until the company isdissolved but once the winding up has commenced, it mustcease to carry on its business. Members or creditors mayapply for the voluntarily winding up. Once the winding uphas been completed, the liquidator must account to ageneral meeting of the company. The meeting is advertisedat least one month in advance in such newspapers as theliquidator thinks most appropriate to ensure that themeeting comes to the notice of the creditors.

Compulsory winding upA company may be compulsorily wound up where it hasresolved to be wound up by the QICDRC, if it is unable topay its debts, if the company does not commence tradingwithin a year of its incorporation, suspends business for ayear or where the QICDRC believes it is just and equitableto wind it up.

Under the Regulations, a company is ‘unable to pay itsdebts’, when it has received a written demand requiring it topay a sum due from a creditor to whom it is indebted for a sum exceeding $2,000 and which it has not paid

or agreed settlement terms for within 3 weeks. It is alsodeemed unable to pay its debts if it is proved to the satisfaction of the QICDRC that it is unable to pay itsdebts as they fall due or if the company’s assets are lessthan its liabilities. The company, all or a majority of directors,the creditors or the QFC Authority (where expedient in itsinterests) may also apply for the company to be wound up.

Distribution priorities in a liquidation • secured creditors in order of priority;• costs and expenses, including the liquidator’sremuneration;

• preferential creditors (as defined); • unsecured creditors.

DissolutionThree months after the liquidator has sent his final accountand return to creditors, the company is deemed to bedissolved and the liquidator must apply to the CRO for it tobe struck from the register.

Jurisdictional issues: potential for overlap Given the existence of two competing jurisdictions, thereis unfortunately scope for both the Qatar Courts and the QIDRC to accept the conduct of the same matter,which can be a costly obstacle to pursuing litigation.Further information on this complex issue is available fromthe authors.

24th – 26th January 2016

INSOL Dubai

This edition of INSOL World is available at INSOL Dubai on the conference App. We look forward to welcoming over 500delegates from 44 countries and hope they enjoy the vibrant mix of topics presented by leading international practitioners.We are honoured that our keynote speaker is Mrs. Al-Ghunaim, the Vice Chairman and Group Chief Executive Office ofGlobal Investment House. She was involved in several milestone transactions and has been recognized as a role modelfor Arab women and women in the Islamic world, and has received several accolades from industry leaders. We lookforward to welcoming Mrs. Al-Ghunaim to our conference and hearing her insight into the region.i

We would like to thank the Main Organising Committee:

We would also like to thank our sponsors for their support of the conference and INSOL International, which enablesthe association to continue develop its increasing programme of activities around the world.

Welcome Dinner Sponsor: Corporate Sponsor:

Monday Lunch Sponsor: Monday Breakfast Sponsor:

Tuesday Lunch Sponsor: Coffee Breaks Sponsor:

Small Practice Dinner Sponsor:

INSOL Younger Members Reception Sponsor:

INSOL Fellows Reception and Half Day Programme Sponsors:

MENA Roundtable Sponsor:

i For those members who were unable to attend the conference this time, a full overview of the INSOL Dubai will appear in the next edition of INSOL World.

Tony Bugg, Linklaters LLP, UKConference Co-Chair

Simon Freakley, AlixPartners, UKConference Co-Chair

Friedrich von Kaltenborn-Stachau,RSM International, GermanyFellow, INSOL InternationalTreasurer

David Fletcher, BDO LLP, UKTechnical Co-Chair

Ian Jack, Baker & McKenzie LLP, UKTechnical Co-Chair

Robin Abraham, Clifford Chance, UAEMarketing Chair

Jan Bunnemann, DLA Piper LLP, GermanyFellow, INSOL InternationalSponsorship Chair


The Doing Business Report, a joint project of the WorldBank and International Finance Corporation sheds light onthe ease of doing business, by tracking changes inregulation in 11 areas in the life cycle of a business andone among them is ease of resolving insolvencies. Themost recent Doing Business Report ranks India 137 out ofthe 189 economies for resolving insolvencies. Accordingto data collected by Doing Business Report, resolvinginsolvencies in India takes 4.3 years on average and themost likely outcome being that the Company will be soldas piecemeal sale. In spite of being structurally similar tosome efficiently functioning insolvency regimes of world,the Indian regime has not proved to be very effective in practice.

In India the Sick Industrial Companies (special provisions)Act 1985 (“SICA”) remains to date the only centralcorporate rescue law in force. SICA has been criticised for:

a) failing in its mandate to provide a timely rescuemechanism;

b) the incentives given by the debtor-in-possession regimeunder SICA to management to propose and implementrisky rescue measures the costs of which would largely beborne by creditors;

c) the failure to facilitate the early detection of corporatedistress thereby giving very little scope for Corporaterestructuring.

Chapter V of Companies Act 1956 (or Chapter XV ofCompanies Act 2013) is another mechanism whichenables prepackaged or pre-negotiated restructuringplans with creditors under court supervision. Thismechanism also had its limitation as it did not provide anautomatic moratorium and failed to serve the purpose ofcorporate rehabilitation.

A Bankruptcy code to safeguard the interest of creditors,promote economic growth by enabling efficient resourceutilisation and promote a robust corporate bond market isthe need of the hour in India.

Recognising the significance of having an entrepreneurfriendly legal bankruptcy framework, the financial regulatorhas prepared an interim report on Bankruptcy LawReforms, which has now been put up for comments andrecommendations from public and other stakeholders.

India will soon see the beginning of reformed bankruptcyregime.

The corporate insolvency regime of most legal systems iswidely categorised as either debtor friendly or creditorfriendly. In India, the reorganisation and liquidation regime,as proposed in chapter XIX and XX of Companies Act2013 subscribes to the philosophy of giving primacy (atleast in the law “on the books”) to the interests of creditorsover those of the shareholders and other stakeholders.Nevertheless, success or failure of an insolvency regime isnot a function of which side of the “friendliness spectrum”given system falls, rather than it is dependent on the legalinstitution within which the system operates, as well as thenature of the firms that the law services and their capitalstructure.

The Companies Act 2013 provides for a new com-prehensive regime for revival and rehabilitation ofcompanies under Chapter XIX. Unlike SICA which appliedto specified industrial companies only, the Companies Act2013 for corporate rescue is applicable to all companies.The procedure under Companies Act 2013 in relation tocorporate rescue will be administered by NationalCompanies Law Tribunal (NCLT) a quasi-judicial body.

Chapter XIX of Companies Act 2013 makes it significantlybetter than SICA by:

i) providing for the greater involvement of creditors inrehabilitation process;

ii) establishing reference criteria based on liquidity test (instead of erosion of networth);

iii) avoiding an automatic moratorium (the moratoriumunder Companies Act 2013 will be available only onapplication to NCLT and is available only for a fixedduration of 120 days);

iv) making provision for committee of creditors (withrepresentatives from every class of creditors) that will havea say in determining whether a company should beliquidated or rescued;

v) imposing a requirement of creditor consent forapproving a scheme of rescue (that gives rights to bothsecured and unsecured creditor);

vi) making provision for appointment of administrators;

vii) making provision for a “Rehabilitation and InsolvencyFund”.

The main drawback of SICA Scheme was that it left thedebtor company in possession of the assets whichcreates an asymmetry and imbalance between the debtorcompany and its creditors, conferring on the inefficient orinept management an unmerited advantage. In order toaddress this concern the Companies Act 2013 providesthat an interim administrator or the Company administratorappointed as part of the rescue process, can take over themanagement of the debtor company.

The Bankruptcy reform panel has recommended a 180

Bankruptcy Law Reform – a New Horizon to Corporate Insolvency in India

By Ameeta TrehanLastaki Advisors Ltd, Steelco Gujarat Ltd, Galada Power and Tele Communications LtdMumbai, India


The long-awaited reform of Hong Kong’s corporateinsolvency law is eventually under way. The draftCompanies (Winding Up and Miscellaneous Provision)(Amendment) Bill 2015 (the “Draft Bill”) introduces newprovisions to streamline the winding up process and toincrease protection for creditors, but it is disappointing tosee some seemingly unnecessary amendments, whilstsome hoped-for improvements have just been ignored.

When we first wrote about the subject some two years ago,the Administration’s proposals were merely that -proposals. Nothing was set in stone, or so it seemed,despite a general acknowledgement that changes wereneeded to bring Hong Kong’s corporate insolvencylegislation into the 21st-century.

In the summer of 2015 the government issued the DraftBill, but gave interested parties only 14 days in which torespond to a document which ran to 90+ pages, at a timewhen many of the interested parties were on holiday. Fastforward, and on 14 October 2015 the Draft Bill was putbefore the Legislative Council (“LegCo”) with interestedparties being given only 10 days within which to makefurther comments and three minutes (later extended to a full 4 minutes!!) for individuals to make oralrepresentations to the Bills Committee. Before looking atthe good and not so good, it’s interesting to note that afteryears of inactivity on the issue of corporate insolvency lawreform, the Administration seems to be putting all itsweight behind pushing this bill through as quickly aspossible.

Good thingsThe Draft Bill introduces “Transactions at an Undervalue”,which are currently part of the personal insolvencyregime, but not the corporate regime. It also seeks toremedy deficiencies in the unfair preference provisions byintroducing new sections defining associates, andremoving cross-references to the Bankruptcy Ordinance.

The Draft Bill also modernises the way in which theliquidators can work with Committees of Inspection,including less Court involvement, and introduces extensiveprovisions allowing liquidators to communicate withstakeholders by electronic means, whether by email orwebsites.

Not so good thingsHowever, it also contains some amendments which seemto be overkill.

Historically, the majority of Hong Kong liquidations havebeen court supervised. This is however changing and it isunfortunate that the proposed changes to conveningmeetings of creditors to start a creditors’ voluntaryliquidation have been amended in a manner which leavesthem open to abuse to the potential detriment of creditors.

Meanwhile, many insolvency practitioners have raisedtheir eyebrows at the much expanded provisionsconcerning private examinations. On the positive side,additional wording has been inserted giving liquidatorsenhanced powers regarding access to certain types ofdocuments. However, the Administration has chosen toextend this provision from four sub-clauses of 226 wordsto three sub-sections totalling approximately 800 words.

Private examinations under s.221 of the current legislationhave been used extensively in recent years to assistliquidators in effecting recoveries for creditors. It isconcerning that the extensive re-wording brings with it thepossibility that the effect of this section may be curtailed.This would be of slightly less concern if theAdministration’s track record of amending legislation

Hong Kong’s Law Reform - A Missed Opportunity

By Stephen BriscoeBriscoe Wong AdvisoryHong Kong

day period for insolvency resolution and setting up of anew regulator to oversee the process. It lays out a clearsystem for the identification of financial distress andrevival of companies with help of special insolvencyprofessionals.

Given the increase in foreign investment into India in the recent past, the impact of Indian laws that affectbusinesses ought to be viewed in conjunction with laws of other jurisdiction. In this context, the bankruptcyreforms have taken into consideration the importance ofdeveloping an efficient system for addressing cross-border insolvencies in India. It is recommended that the UNCITRAL Model Law on Cross-border Insolvencyshould be adopted in India. The UNCITRAL Model Law provides a legal framework to co-ordinate cross-

border insolvency proceedings so as to protect theinterest of all stakeholders. The bankruptcy reformcommittee is however of the opinion that further thought and consideration is required beforeimplementing the UNCITRAL Model Law and suchadoption should ideally take place after adoption of theBankruptcy code.

Currently, there are massive bottlenecks in India’sbankruptcy system and inconsistent treatment in resolvingcases. Law reform alone will not entirely address theproblems. There is also a critical lack of judicial capacityto process the number of bankruptcies not just in terms ofnumber of professionals needed, but also in terms ofbankruptcy expertise in interpreting and executingbankruptcy law.


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which contains lacunas were better than it actually is.

In addition, the Draft Bill introduces potentially onerousnew provisions regarding the release and removal ofliquidators.

The two most egregious clauses would, in one case, allowa liquidator who has been released by the court to besued by a stakeholder, albeit they would have to obtain thesanction of the court; and secondly a new clause wouldallow any creditor whose claim is more than 10% of thetotal creditors to convene a meeting of creditors to removea liquidator, but with the liquidator being given no right toobject to his removal!

The first of these two clauses raises the question of whenis a liquidator ever released, and how long will hisprofessional indemnity insurance have to follow himaround - maybe as far as his grave!! The second clausewould allow a creditor, against whom a liquidator mighthave claims, to remove the liquidator, (always assuming ofcourse he can get the necessary 50% majority), but wouldgive the liquidator no right to object to the court to hisremoval.

Still missing…The Draft Bill remains silent on the implementation of acorporate rescue regime, although the Administration haspromised it will be put before LegCo in the 2017/2018session.

Meanwhile, the Draft Bill is littered with additionalresponsibilities imposed upon liquidators. Some existedpreviously, but many are new and carry potential criminalliabilities. None of these would be necessary if thegovernment had taken the opportunity to implement a formof licensing for insolvency practitioners.

As it is, the government’s proposal that liquidators sign anEligibility Statement to be presented to creditors at ameeting is cumbersome, unnecessary and fraught with practical difficulties that do not appear to have been properly thought out. A system of licensing would resolve this. It is difficult to accept the argument thatHong Kong is too small a jurisdiction to have licensing when one considers the Cayman Islands, the BVI and, dare one say Singapore, all of which aresmaller than Hong Kong, and have some form of licensingregime.

And finally, there is the elephant in the room which is theUNCITRAL Model Law. Hong Kong is a focus for cross-border insolvency issues and cases are appearing beforethe Court on an increasingly regular basis. Yet nowheredoes the government even mention the words cross-border insolvency or the Model Law!

All in all, it is unfortunate that these proposed amendmentswill do little to enhance the reputation of Hong Kong as aplace where the interests of all stakeholders are properlyprotected.

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In the case of Kam Leung Sui Kwan, PersonalRepresentative of the Estate of Kam Kwan Sing(Deceased) v Kam Kwan Lai and Others FACV 4 / 2015,Hong Kong’s Court of Final Appeal (the CFA) consideredwhat connection a foreign company must have with HongKong to entitle a Hong Kong court to wind it up on the justand equitable ground.

The company in question, Yung Kee Holdings Limited (theCompany), is incorporated in the BVI. The Company itselfhas no employees or bank accounts and it does not carryon an investment or any other business. It is the soleshareholder of another BVI company which in turn, viaanother BVI entity, holds substantive shares in theoperating subsidiaries which are incorporated and carryon business exclusively in Hong Kong (of which the corebusiness is the well-known Yung Yee Restaurant which isfamous for its roast goose dishes). Mr. Kam Kwan Sing (thePetitioner, now deceased) and his younger brother each

holds directly or indirectly 45% of the shares inthe Company. It is worth noting that it is commonfor wealthy Hong Kong families to use offshoreentities to hold assets or business in order toavoid Estate Duty, which is payable on Hong Kongassets only (before Estate Duty was abolished in2005).

The two brothers had fallen out after the demise oftheir father, who founded the business. ThePetitioner alleged that the affairs of theCompany’s business were being carried on in an

unfairly prejudicial manner towards him. He broughtproceedings in Hong Kong, seeking an order pursuant tos.168A of the Companies (Winging Up and MiscellaneousProvisions) Ordinance (the Ordinance) for his youngerbrother to buy out his shares; or alternatively an order thatthe Company be wound up on the just and equitableground under s.327(3)(c) of the Ordinance.

As regards the Petitioner’s application for a buy-out,s.168A of the Ordinance applies to either a Hong Kongcompany or foreign companies which establish a place of business in Hong Kong. As the Company is a BVI entity, the court’s jurisdiction to make an order unders.168A depends on whether the Company has establisheda place of business in Hong Kong.

In the CFA’s view, “place of business” connotes a placewhere or from which the company either carries on orpossibly intends to carry on business. While “business” is

Hong Kong’s Highest Court Allows Winding Up of a Foreign Companyon the Just and Equitable Ground

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not confined to commercial transaction(s) which createslegal obligations, there is no reason to suppose that itcovers purely internal organizational changes in thegovernance of the company itself. Since the Company is amere holding company with no active business in HongKong, the CFA affirmed the lower courts’ finding that theCompany had not established a place of business in HongKong and therefore the Hong Kong court had nojurisdiction to order a share sale.

On the Petitioner’s application for winding up, the CFA heldthat the proper test to be applied in considering anapplication to wind up a foreign company is as follows: (i) whether there is sufficient connection with Hong Kong; (ii)whether there is a reasonable possibility that the winding uporder would benefit those applying for it; and (iii) whether thecourt is able to exercise jurisdiction over one or morepersons in the distribution of the company’s assets.

The CFA concentrated on the first of these threerequirements. The CFA found that the following factors reliedon by the Petitioner to establish the relevant connectionbetween the Company and Hong Kong are “compelling”:

• All the underlying assets of the Company are situate inHong Kong;

• The business of the group of company is carried outexclusively in Hong Kong;

• The whole of the Company’s income is derived frombusiness carried on in Hong Kong;

• All the Company’s shareholders and directors are andalways have been resident in Hong Kong;

• All the directors of the Company’s directly andindirectly held subsidiaries are and already beenresident in Hong Kong;

• All board meetings of the Company and its subsidiariesare held in Hong Kong and all administrative mattersrelating to the Company are discussed and decided inHong Kong;

• Crucially the dispute is a family dispute between partiesall of whom are and always have been resident in HongKong and events giving rise to it and the conduct ofwhich complaint is made all took place in Hong Kong.

The CFA also expressly disapproved the lower courts’views that any connection between the Company andHong Kong was cut off by the fact that the Company isholding shares in the Hong Kong subsidiaries via anotherBVI entity. Having found that the Company had sufficientconnection with Hong Kong, the CFA held that it was justand equitable to order a winding up, adopting the lowercourt’s factual finding that there was a mutualunderstanding between the brothers about how thebusiness should be run and that understanding had beenbreached by the younger brother.

This case confirmed the Hong Kong court’s jurisdiction towind up foreign companies. The CFA’s decision willprovide useful guidance in the context of familyshareholders’ disputes, since many Hong Kong familybusiness are structured in a way similar to Kam Kwan Singinvolving the use of offshore entities incorporated in theBVI or Cayman Islands.

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IntroductionIn its recent report “Doing Business 2016” the World Bankproduced its latest set of data on the challenges facingentrepreneurs seeking to open and run a business in theUnited Arab Emirates. What is immediately striking aboutthe data is that, as compared to other Gulf CooperationCouncil countries, while it is relatively easy for anentrepreneur in the UAE to set up a business, registerproperty or enforce contracts, it faces particular difficultieswhen confronted by insolvency issues in relation todebtors in financial difficulties. The World Bank reportsthat in the UAE it now takes on average 3.2 years tocomplete an insolvency process with costs amounting to20% of the debtor’s estate and an average recovery ratefor creditors of 29 cents on the dollar.

In contrast, in Qatar those figures are 2.8 years, 22% and56.2 cents on the dollar. The figures in the UAE are slightlybetter than the regional averages for the Middle East andNorth Africa (3 years, 13.8% and 27.5 cents on the dollar)but worse than the averages for the OECD countries (1.7years, 9% and 72.3 cents on the dollar). Globally, the UAEis ranked 91st of the 189 economies analysed by theWorld Bank in terms of the ease with which an insolvencyscenario can be overcome - a ranking which has remainedfairly static over the last few years.

Why does the UAE finditself in this position?The statistics are particularlyconcerning for businesses,banks and government inview the current economicheadwinds facing the countryand the region. For example,the sharp drop in oil pricesover the last year has resultedin a squeeze on liquiditywhich has affected SMEs inparticular. The rate of bank

defaults amongst SMEs has increased during 2015 and itis likely that it will continue to do so into 2016.

Various reasons have been put forward to explain theWorld Bank figures. Some suggest that the lawsthemselves are deficient. For example, it is difficult toobtain information about a debtor’s finances in theabsence of centralised registries which record interestsover all property and which are accessible to the public atlarge. Indeed, it is difficult to obtain an order from the UAEcourts requiring the disclosure of information inproceedings generally. In addition, UAE insolvency law isscattered amongst the Commercial Companies law, theCivil Code and the Commercial Transactions Law andthere are neither specialist courts nor specialist judgesallocated to such cases. This creates uncertainty and, asa consequence, it is complicated for businesses tounderstand fully how the various provisions interact with one another without detailed professionaladvice. Further, the laws remain untested because theyare often avoided altogether by debtors who resort toinformal arrangements and creditors who file criminalcomplaints based on dishonoured cheques. Finally, thereare very few provisions for the recognition of insolvencyproceedings initiated in foreign jurisdictions andconsequently there is little cooperation with thosejurisdictions.

The New UAE Insolvency Law - Where Are We Now?

By Louise Verrill,Nicholas Tse and Ravinder ThukralBrown Rudnick LLPLondon, UK

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The need for reformIt is clear that the Federal Government has, in principle,already accepted the need for reform given that in early2012 a draft Federal insolvency and bankruptcy law wasissued. It has been reported that the draft law encouragescorporate rehabilitation and rescue by providingcompanies with the option to implement a restructuringwithout the consent of all creditors. It also appears tocreate a broad stay on actions by creditors, includingsecured creditors, and provides debtors with anopportunity to obtain new financing with priority inpayment and security over existing debts based on USprinciples of debtor in possession financing. As the USproceedings relating to Arcapita Bank demonstrate, it ispossible for such financing to be structured in compliancewith Sharia principles. Finally, the law is reported toprovide debtors with an option to terminate contractssimilar to the “assumption or rejection” doctrine under theUS Bankruptcy Code.

Despite these positive developments, the law has not yetbeen enacted. It was passed by the Cabinet in July andnow requires final ratification by the Federal NationalCouncil and Supreme Council before it can be approvedby the President.

Dubai WorldOnce the new law is enacted, one aspect that will need tobe considered is its impact on the work of the Dubai WorldTribunal (“DWT”). As readers will recall, the DWT was setup pursuant to Decree No 57 issued by His HighnessSheikh Mohammed Bin Rashid Al Maktoum in December2009 because Dubai World, as a corporation establishedby decree, could not seek protection from its creditorsunder the UAE Commercial Transactions Law. Therefore,the DWT was established to supervise its restructuring.

Broadly, the DWT follows Anglo-American insolvencyprocedures and is staffed by judges who also sit in theDIFC Courts. That supervision extends to hearing allclaims brought by or against Dubai World or any itssubsidiaries. Importantly, the DWT is a special tribunal ofthe onshore Dubai Courts and not the DIFC Courts.

If the scope of application of the new law extends tocorporations established by decree then it may be that theDWT will cease to have any further meaningful role to play,other than resolving those cases of which it is currentlyseized. On the other hand, the new law may envisage agreater role for the DWT either by incorporating parts of itsAnglo-American insolvency doctrine which have shown tohave worked into the UAE or by requiring the restructuringof other substantial corporates to be determined by atribunal similar to the DWT.

ConclusionFor the reasons above, it is inevitable that insolvencylegislation and its practical implementation in the UAE willcontinue to be the subject of careful examinationparticularly by those reviewing the merits of investing inthe country, whether onshore or in one of the manyfreezones.

In the meantime, the MENA Roundtable on Insolvency andRestructuring organised by INSOL International, the WorldBank, Hawkamah and the Dubai Economic Forum held on24 January 2016 could not have come at a more importanttime for insolvency law in both the UAE and the widerregion. If local, regional and international business in thecountry is to flourish then it is crucial that businesses andtheir advisers have a clear understanding of the new lawand how it is intended to change the current insolvencyframework.

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By Ashok Kumar and Darius Tay Kang-RuiTSMP Law CorporationSingapore

The commodities market – the other monsoon?

When it rains, it pours. The overcast skies and monsoonrains this season may be an accurate reflection of thestate of commodities. It has been a tumultuous time for thecommodities market in recent years but clear skies arenowhere in sight yet. As the market declines further, moreand more debt obligations are coming under review andpressure; as parties find their expectations held at the timeof entering into such agreements thwarted by the market’smovements.

Furthermore, the situation has been exacerbated byrecent developments:

• Firstly, the slowdown in China’s economic growth andconsequently their appetite for consumption has hadconsequences unexpected by the industry, with itseffects being felt by businesses across the ASEANregion, notably in Indonesia and Singapore;

• Secondly, the recent agreements in Paris on the cuttingback of fossil fuel usage serves only to weaken thecommodities market further, especially in areas such ascoal, oil and gas – of which effects are already beingfelt; and

• Thirdly, the straw that is likely to break the camel’s backmaybe the recent decision of the Federal Open MarketCommittee which has finally decided to raise its targetfederal funds rate by a quarter of a percentage point,the first increase since September 2007.

It is observed that there has already been a steadily risingtrend of distressed securities and corporate defaults in theregion. The forecast ahead is that these trends will onlycontinue to get worse; driven by low commodity prices,weak growth, foreign exchange volatility and decreasedavailability of finance.

To illustrate the severity of the situation, the sharp decline ofcoal prices has already spawned numerous debtrestructuring efforts, particularly in Indonesia, with thenoteworthy cases of PT Bumi Resources Tbk and PT BerauCoal Energy Tbk, amongst others. These companies foundthemselves struggling as the expectation that coal priceswould recover in the future has not materialised, leavingthem mired with dire, unfulfillable debt obligations.

Eye of the storm - Singapore

Further complicating matters are that these companies’bond issues often have links with different jurisdictionsacross the region, in the form of SPVs, location of assetsand operations or even having them as platforms for theirdebt issuances. Most notably, we have observed cases

developing in Singapore as a result of these companies’struggling with debt obligations.

For example, PT Bumi and PT Berau both have links to theSingapore jurisdiction in this regard, and the restructuringcases have spawned cross-border complexities acrossboth the Indonesian and Singaporean jurisdictions.Indeed, such is the nature of these businesses that it is notuncommon for litigation to be sparked in Singaporedespite their businesses being based elsewhere.

Another highlight in the city-state would be the issues onSingapore Exchange listed China Fishery Group and itsparent company Pacific Andes International Holdings –notably, a tension between bondholders against majorbanks has arisen; with separate insolvency proceedingsforwarded by different groups of creditors taking placeacross jurisdictions in both Hong Kong and Singapore(winding up in the former and interim judicial managementin the latter). The assets of the company are spreadacross the world; and the group’s debt obligations have islikely to cause it to face the threat of litigation that is set toengulf multiple jurisdictions in the region.

The storm rumbles on

The oil and gas industry has not been spared either. Thebearish outlook on oil has seen its consequences felt bypetrochemical businesses; evidenced by theannouncement of Jurong Aromatic Corp’s descent intoreceivership in Singapore, the result of the unviability ofmaintaining negative margins due to depressed prices.Vanguard Energy, a major bunkering business has goneinto liquidation and is currently the subject of variouslitigation proceedings in Singapore as well as assetrecovery efforts. Energy exploration and productioncompany Mirach Energy, which has assets in bothCambodia and Indonesia, has been placed on theSingapore Exchange’s (SGX’s) watchlist of companiesthat are struggling financially.

The tumble in vessel values and freight rates have alsosparked a flurry of terminations of previously agreedcontracts. Parties once again are finding that expectationsheld at the advent of their agreements are failing tomaterialise. As a result, they are finding it more efficient toprematurely terminate various contracts.

In Singapore, Marco Polo Marine terminated a $306-millionrig building contract with SembMarine in November 2015,giving rise to a potentially long and messy legal tussle asparties seek to reclaim their losses for breaches of thecontract.

SembMarine has also deferred delivery of its rigs to USA-based North Atlantic Drilling, with expectations that profits will be taking a hit. Furthermore, Petrobras has recently axed multiple shipbuilding deals withshipbuilder Vard Holdings.

Singapore – the Eye of the Storm?


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The determination of the relevant supervising jurisdictionover such contracts will be a key issue in these types ofcases as parties seek to resolve disputes arising fromearly termination and setting aside of contracts. Indeed,we expect the Singaporean courts to be heavily involvedwith these conflicts in the coming future as Singaporecompanies are some the largest offshore rig suppliers inthe world.

General outlook on Singapore

Indonesian telecom retailer Trikomsel has recently warnedthat it would be unable to meet its obligations on twooutstanding Singapore dollar bonds due in 2016 and2017; with coupon payments already being defaulted on.The relevance of Singapore as a jurisdiction to keep aneye on has never been more evident; as the popularity ofissuing bonds in the city-state can be observed.

With expectations of growth greatly stymied, firms are now looking towards preservation rather than expectedexpansion. Global trade is anaemic, and companies have started to review their potential profits – for example,Singapore-listed Cosco Corp (S) Ltd, the mainshipbuilding arm of China’s China Ocean ShippingGroup said it will post a “significant net loss” in the fourth quarter – prompting share price plunges in the SGX.

In the shipping industry, long-established, Singapore-

listed Neptune Orient Lines has been in sharp decline asa result of falling vessel values and freight charges; albeitwith a recent silver lining emerging following CMA CGM’sannounced takeover bid for US$2.4 billion. Other shippingfirms however, may not be so fortunate, and it would bewise to keep an eye on entities in this sector for distressedopportunities. Singapore is home to many establishedshipbuilders and repairers and we expect that this is notthe end of the story.

Weathering the storm

The commodities downturn has defeated expectations ofa recovery; and does not look to be changing any timesoon. The recent Federal interest rate hikes as well as thelack of any potential improvement in oil prices, given SaudiArabia’s stance of refusing to reduce output as well asemerging new suppliers in Iraq and Iran, are keyeconomic indicators in this regard.

The consequences of these events will extend beyond the home countries of affected industries. Singapore’s roleas a key global player in the oil and gas and maritime industries, as well a favoured jurisdiction for the raising of capital by foreign companies would likely make it the eye of the storm as the various factorsdiscussed above culminates in restructuring and disputeresolution proceedings. As such, it would be wise for practitioners to keep an eye out on any cross-border elements of their client’s positions in the nearhorizon.

mailto:@harneys.com







The restructuring of the Berlian Laju Tanker (“BLT”) and itssubsidiaries has shown how a workout involving anIndonesian incorporated company can be effected usingrestructuring related and other legal processes in variousjurisdictions and it also provided some useful clarity on thescheme of arrangement process in Indonesia.

The lead-up to the restructuring

BLT is a global maritime player in the transportation ofliquid bulk cargo, and the only company with a dual listingon the Indonesian Stock Exchange and the SingaporeStock exchange. With the global plunge in tanker freightrates and freight volumes over the past few years, coupledwith overcapacity that was building up in the market, theshipping industry faced severe challenges. By 2011,several major shipping companies were in difficulty.

BLT was not spared. In January 2012, BLT announced thata covenant breach had occurred under one of its loanfacilities. BLT also declared a standstill on the repaymentof all indebtedness, so that it could undertake a holisticreview of its financial position and borrowingarrangements. Shortly thereafter, BLT appointed BorrelliWalsh to oversee its restructuring effort.

Unlike the majority of its creditors, some trade creditorsfiled claims against BLT’s vessels and caused a number ofthem to be arrested. This inevitably resulted in a loss ofcustomer and supplier confidence in BLT’s operations.BLT’s cash position was also beginning to be drasticallyaffected, as cash had to be put up as collateral to releasearrested vessels and key supplies, such as bunker, wereno longer being offered to BLT on credit terms. BLT’sbusiness was nearly grinding to a halt.

Dealing with the immediate threats

To deal with the dire situation, in March 2012, a number ofBLT’s vessel-owning subsidiaries (mostly Singaporeincorporated) applied to the Singapore court for protectionpursuant to the moratorium provisions relevant to schemesof arrangement under the Singapore Companies Act. Theprovision which allows for a Court to grant a moratorium onclaims against a company seeking to restructure its debts

is of immense value in an effort to rehabilitate acompany without having to constantly deal with avariety of legal proceedings. With the support ofthe main secured lenders, the Singapore courtsmade the moratorium orders.

The Singapore court proceedings were followedup a day later by petitions presented in the UScourts, seeking the recognition of the Singaporeproceedings under Chapter 15 of the USBankruptcy Code. The petitions were swiftly heard

by the US courts, which granted an interim injunctionagainst all enforcement action on BLT’s vessels.

These steps resulted in a dramatic reduction in arrests ofBLT’s vessels. With time, customer and supplierconfidence returned, and BLT’s secured lenders weremore assured that their collateral (mainly BLT’s vessels)was protected. This gave BLT space to focus on workingwith its advisors to put together a restructuring plan. Thecooperation between the Singapore and US jurisdictions,and the speed at which the relevant protections from thosecourts were obtained, were critical.

BLT enters the PKPU process

It was always intended that the restructuring processwould involve BLT commencing proceedings for a schemeof arrangement in Indonesia (referred to as a “PKPU”process). However, while BLT and its advisors wereworking on its restructuring plan, in June 2012, BankMandiri, one of BLT’s Indonesian bank creditors, itselfcommenced PKPU proceedings against BLT in Indonesia.The PKPU process put BLT into a formal court-supervisedinsolvency process under which it had to propose arestructuring plan within 270 days. The Indonesian PKPUprocess differs from most scheme processes in that acreditor can file for it, thereby placing the onus on thedebtor company to file a scheme and get it passed within270 days. In addition, the failure to pass the proposedscheme at a meeting would result in the automaticbankruptcy of the company. The fact that a creditor couldput pressure on BLT in this way shows how powerful theIndonesian PKPU process can be for creditors, who wouldnot be able to avail themselves of such a procedure inmany other jurisdictions.

BLT quickly started work with its creditors, which wasdifficult not least because of the very varied nature of thecreditor base, which included bank lenders, bondholders(including pension funds and holders of sharia-compliantbonds), derivatives providers, vessel lessors and tradecreditors. Each of these types of creditors held differenttypes of debt instruments with different security structures,currencies and interest rate expectations.

The Restructuring of Berlian Laju Tanker

By Sushil Nair and Mohan GopalanDrew & Napier LLCSingapore


Adding to this complexity was the fact that BLT’s main groupof syndicated lenders did not wish to participate in thePKPU process. Without these lenders, any vote amongstcreditors would become much more fragmented.

On 8 March 2013, BLT proposed a restructuring plan aspart of the PKPU process, but did not receive sufficientvotes from creditors at the meeting for the plan to becarried. The PKPU process requires that at least 50% ofcreditors representing two-thirds in value vote in favour ineach class. In BLT’s case, in the unsecured class, 70% ofthe creditors representing 82% in value voted in favour ofthe plan. However, in the secured class, only 67% ofcreditors representing 57% in value voted in favour, whichdid not fulfil the value requirement.

However, BLT was ultimately saved because of a little-usedprovision in the PKPU law, which allows the debtor companyto require a second vote within 8 days if at least 50% innumber and value in each class voted in favour of the planproposed at the first creditors’ meeting. A second vote wastherefore held on 14 March 2013, at which the plan wasapproved in the unsecured class by the same percentagesas before, and in the secured class with a unanimous vote.The ability to force a second vote was again a critical pointin the restructuring.

BLT’s restructuring plan was then sanctioned by the

Indonesian courts on 22 March 2013. Certain Indonesianbondholders appealed against this decision, but the appealwas eventually dismissed.

Implementation of the restructuring plan

The restructuring plan proposed by BLT involved fullrepayment for most financial creditors but over a longerduration, while trade creditors would generally take ahaircut and be repaid over a shorter duration. A smallamount of equity in BLT was offered to certain unsecuredfinancial creditors.

This plan was implemented mainly through contractualdocumentation with the various creditors. The BLTsubsidiaries that had previously applied to the Singaporecourt also proposed schemes of arrangement to theircreditors, the terms of which mirrored the restructuring planproposed in the PKPU process. These schemes ofarrangement were approved by creditors and theSingapore courts, and were eventually also grantedrecognition in the US under Chapter 15. The restructuringplan proposed in the PKPU process was itself also grantedrecognition under Chapter 15.

A more long-term solution

The restructuring plan contemplated that BLT would obtainadditional financing, but over time, the prospect ofachieving this looked unlikely, as the general economic

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situation was not improving. It therefore became necessaryfor BLT to look for a more long-term solution. When a largechunk of BLT’s main syndicated loan was bought up byKKR, York Capital and other funds in 2014, the search forthis longer-term solution had to be accelerated.

Eventually, BLT and the syndicated lenders agreed that BLTwould consensually transfer certain mortgaged vessels to anew company in which the lenders would be majorityshareholders, while BLT would hold a minority stake.

Certain unsecured creditors would also be offered equity inBLT in exchange for their debt. BLT would retain severalother assets, including vessels and interests in otherinvestments, which would allow it to continue operating inthe future.

To implement this proposal, the restructuring planpreviously proposed by BLT under the PKPU process hadto be amended. At the time, there did not appear to be any precedent for such an amendment, but the fact wasthat the original PKPU plan that had been approved by thecreditors and sanctioned by the Indonesian courtsprovided for amendments to be made to its terms if suchamendments were approved by the same percentage ofcreditors as was required for the PKPU itself to have been passed. Using this provision, meetings were held with the relevant creditors and the proposed

amendments obtained the requisite approval from them.BLT’s case eventually became the precedent that showed that an amendment to a PKPU could be effectedin this way. The schemes of arrangement previously put in place in Singapore also had to be replaced, andsignificant coordination was required with the Indonesianand Singapore stock exchanges.

A major portion of the proposal was eventuallyimplemented on 1 December 2015, when the mortgagedvessels were successfully transferred to the new company.However, further work remains to be done to fullyimplement other parts of the proposal, such as the debt-equity swap.

Conclusion

While BLT’s restructuring has been a long and arduousprocess, it has eventually resulted in a win-win outcome forall stakeholders, including its creditors, shareholders andemployees. With a more stable capital structure goingforward, BLT itself has also come out of the process astronger company. The restructuring will put BLT in a betterposition to weather the current economic climate, whichremains challenging for the shipping industry generally.Many lessons have been learnt in the process, not least inrelation to the benefits of using different jurisdictions tohelp in the restructuring process and in making clearer theambit and extent of the PKPU law.

Ian Strang was the first president

of INSOL International and was

instrumental in creating INSOL

International, laying the

foundations of the association

that we have today.

To recognise his achievements we havecreated an award in memory of Ian. TheIan Strang Founders Award provides an

educational opportunity for a post-graduate specialising in insolvency andturnaround to attend the Annual INSOLInternational Academics Colloquium andthe annual INSOL InternationalConference (when held jointly).

The applications are now open for 2016.

• Be a postgraduate or early-career academic researcher in the field of law or accountancy specialising in insolvency & turnaround, or a recently qualified lawyer or accountant interested in the academic as well as the practical aspects of the subject.

• Provide a paper of not more than 10,000 words with regard to areas concerning cross-border issues.

• This paper should be an original piece of work, which has not previously been published in the form in which it is submitted.

The paper should be submitted by the1st September 2016. A panel ofinternational academics andprofessionals will judge the papers andmake the award by the 1st October

2016. Applicants are asked to submittheir CV along with the paper.

The successful applicant will:

• Be invited to attend the Academics Colloquium on the 18-19 March 2017, and INSOL 2017 on 19–22 March, Sydney, Australia. An allowance will be provided to cover travel and accommodation.

• Have the opportunity to present the paper at the INSOL International Academics Colloquium.

• Be recognised at the conference and receive a framed certificate of the ISFA.

• Be encouraged to submit the paper to the International Insolvency Review with a view to its publication. The paper will also be published on the INSOL website.

Please send your application to:

Ian Strang Founders Award

INSOL International, 6-7 Queen Street,

London EC4N 1SP, UK or email to Claire

Broughton at: [email protected]



“Light Touch” Restructuring Provisional Liquidator: Cross-Border Rehabilitation ofBermuda and Cayman Islands Companies Listed in Hong Kong

By Ian Mann, Fellow, INSOL InternationalHarneysHong Kong

Sarah-Jane Hurrion and Marc KishHarneys HarneysBermuda Cayman Islands

Just under 80% of companies listed on the Hong KongStock Exchange are either Cayman Islands or Bermudaincorporated. The cross-border restructuring of Hong KongListed companies that are incorporated in the CaymanIslands and/or Bermuda is booming. The economic factorsthat have caused this, mainly by reason of a slowing inChina’s economy, is outside the scope of this work.However, the legal drivers for this restructuring boom are thefollowing: Hong Kong does not have an equivalent regime tothe United States “debtor in possession” Chapter 11Bankruptcy Code or United Kingdom administration tofacilitate the rescue of an insolvent company. Nor does ithave a debtor-driven restructuring provisional liquidationtool, although restructuring following an old-style “risk ofdissipation” provisional liquidator is technically possible(see Re Legend International Resorts Ltd [2006] 2 HKLRD192). However, in Bermuda and the Cayman Islands,through the common law, and legislative provisionrespectively, there is a bespoke restructuring provisionalliquidation tool. This tool has recently proved useful forstakeholders in relation to Bermuda and Cayman Islandscompanies publically listed in Hong Kong.

BermudaIn Bermuda, the Supreme Court of Bermuda has usedprovisional liquidation as a mechanism by which toimplement financial or operational restructurings in order toeffect corporate rescues, preserve value in the business forstakeholders, and ensure the company/group in question isable to continue as a viable enterprise going forward. Theseminal judgment laying the foundation for the use of arestructuring provisional liquidator is the judgment of WardCJ (as he then was) in Re ICO Global Communications(Holdings) Ltd [1999] Bda LR 69 (see also In The Matter OfTitan Petrochemicals Limited [2013] SC (Bda) 74 Com)). Inorder to appoint provisional liquidators with soft powers, forexample to monitor the management while restructuringtakes place, it is first necessary to present a winding uppetition to the Court under s. 161 of the Companies Act1981. The Company can then make an application toappoint a provisional liquidator with limited powers, basedon the Court’s powers under ss. 164 and 170 of theCompanies Act 1981. In Bermuda, the situation is moreflexible than the Cayman Islands, and a restructuringprovisional liquidator can in theory be appointed by, not onlythe company, but also the creditors.

Cayman IslandsIn the Cayman Islands, companies can seek to appointprovisional liquidators pursuant to Part V of the

Companies Law (2013 Revision) (“Companies Law”),specifically s. 104(3), to assist the company in promotinga compromise or arrangement with its creditors ormembers. An application under s. 104(3) can whereappropriate be made by the company on an ex parte basison the grounds that the company is or is likely to becomeunable to pay its debts as they fall due and, as mentionedabove, the company intends to present a compromise orarrangement to its creditors and investors – mostcommonly by the promotion of a scheme of arrangementpursuant to s. 86 of the Companies Law.

The Companies Law in its current state does notspecifically provide for a creditor or contributory or the Cayman Islands Monetary Authority (in the case of regulated entities) to seek the appointment of provisional liquidators to promote a “light-touchrestructuring” similar to s. 104(3). Instead, to haveprovisional liquidators appointed, these parties must firstdemonstrate that there are prima facie grounds to wind upthe company, and that the appointment of provisionalliquidators is necessary to prevent the dissipation or misuse of assets, oppression of minority shareholders ormismanagement or misconduct by the company’s directors(s. 104(2) of the Companies Law). In such cases, thepowers of the incoming provisional liquidators will be limitedto safeguarding the assets on behalf of those with afinancial interest and preventing any further oppression ormisconduct pending the hearing of the winding up petition.

Observations for both jurisdictionsIn both jurisdictions, on the appointment of provisionalliquidators, the Court will determine which corporatepowers will remain with the directors and which will bevested in the provisional liquidators. The appointment ofprovisional liquidators invokes the statutory moratorium onany proceedings, including winding-up proceedings by adisgruntled creditor, being brought against the company. Amoratorium is also available for risk of dissipationprovisional liquidators.

In neither jurisdiction, does the moratorium prohibitsecured creditors from enforcing their security. The “lighttouch” restructuring procedure is recognised as a robust,flexible restructuring tool that can allow the company timeto put in place, for example, new funding, negotiate thecram down of debts with its creditors, release of claimsand to ultimately continue as a going concern. Upon theappointment of provisional liquidators, the hearing of thewinding up petition will most likely be adjourned.

A provisional liquidator can only carry out such functionsconferred on him and his powers may be limited by theorder appointing him. This means that a company, workingclosely with its legal advisers, can request that the Courtmake an order in such terms that the directors of thecompany, subject to suitable Court supervision, remain keyto managing the company’s affairs and give effect to any

proposed restructuring. As such, the provisional liquidator’spowers may be tailored to the company’s needs.

Whilst the powers of a provisional liquidator are wide-ranging and similar in some ways to those which may bebestowed on official liquidators, (unless the powers havebeen limited by the Court as mentioned above) the effect

of a winding up order over an insolvent company isdrastically different to the appointment of provisionalliquidators. A winding up order would simply lead to aliquidation of the company, and in most cases a diminutionin asset value, whereas provisional liquidators wouldattempt to restructure the debts of the company in order topotentially increase the return to creditors.


By Rein PhilipsFellow, INSOL InternationalRedbreast Associates N.V.Amsterdam, The Netherlands

It was Scott Butler from my Fellowship class who told methat in Australia, for each substantial bankruptcy claim, hewould first obtain three quotes from litigation funders. Thisopened my eyes. Though I had come across litigationfunding in one or two bankruptcies in the Netherlands,litigation funding is not nearly as common in Amsterdam asit appeared to be in Sydney.

Made in AustraliaAustralia is the cradle of third-party litigation funding. From there, it found its way to other common-law jurisdictionslike the UK, the US, and Hong Kong. Currently, there are anumber of major listed and privately funded third-partylitigation funders active in common-law jurisdictions.

With Germany as the sole exception, continental Europe islagging behind somewhat, though it seems to be rapidlycatching up as lawyers join forces with capital to providelitigation funding to the continent. Germany already has awell-established third-party litigation funding market thatoriginates from its widely established legal cost insurancebusiness. Recently, US funder Burford Capital invested €30 million in Hausfeld Germany to fund anti-cartel cases.The rise of litigation finance in Europe seems to have onlyjust begun.

Full disclosure: I am the managing director and co-founderof Redbreast, a recently established third-party litigationfunder based in Amsterdam.1

Venture capitalist or contractor?Generally, third-party litigation funders provide financing toclaimants to cover the costs of litigation in return for a shareof the proceeds. Financing is made available on a non-recourse basis, with the funder assuming the risk of anyproceeds being insufficient to cover the costs involved.

Steinitz and Field compare litigation funders to venturecapitalists, who contribute capital and often strategic know-how to a venture in exchange for a share of the valuerealized on exit.2 The litigation funder’s exit is the voluntaryor involuntary settlement of the claim.

In civil-law countries where parties are free to agree to givethe funder a larger role in the suit, the funder could also act as general contractor, who contracts the prosecution of the claim, including the management of litigation, onbehalf of the client for a contingent fee. The litigation funderwould then subcontract the attorneys and experts for thecase directly.

In either case, the litigation funder does not purchase orassume the claim itself. If anything, it purchases only apiece of the claim’s proceeds.

Litigation finance can also be used to fund the costs ofdefence litigation. In that case the funder’s consideration iscontingent on certain predefined results. Litigation financecan take the form, too, of financial leasing, when plainworking capital financing is provided against a large pieceof litigation.

Litigation funding in distressed situationsThere is an obvious match between litigation finance andfinancially distressed companies with valid claims thatrequire expensive litigation to realize their value. In fact,third-party litigation funding first emerged in Australia inbankruptcy cases.3

Joining forces with a specialist litigation funder might beworth considering even if cash is not the issue. Anadministrator with a complex but potentially valuable cross-border claim might hesitate to spend creditors’ money onthe venture. The creditors’ committee might be even morereluctant. In such cases litigation funding can be a solution.A litigation funder can assume the risk that eventualrecoveries are insufficient to cover expenses, while thecreditors will still receive the majority of any surplusrealized. The funder can also arrange insurance againstadverse costs risk. Furthermore, using a funder in thejurisdiction where the claim is to be litigated, or aninternationally operating funder with a local network, canprove helpful in understanding the merits of the case andpossible enforcement issues.

The same applies to distressed companies. In arestructuring scenario, investing new money in expensivelitigation might well seem less than appealing to bothlenders and shareholders, even if the claim hasconsiderable upside potential. At the end of the day, formost companies litigation is a risky investment in a non-coreasset. Here, again, litigation funding might provide asolution.

Like any other parties investing in a distressed situation,litigation funders should consider how their fundingarrangements and the suit might be affected by ongoingrestructuring or insolvency filings.

Considerations when entering into a fundingagreementMaintenance and champertyIn some common-law jurisdictions the doctrines ofmaintenance and champerty are still a hurdle for third-partylitigation funding agreements. In essence, these doctrinesprohibit a third party from giving assistance to a litigant in

The Rise of Third-Party Litigation Funding

1 Redbreast Associates N.V., www.redbreast.com.2 Maya Steinitz and Abigail Field, “A Model Litigation Finance Contract”, Iowa Law Review, 99 (2014), pp. 711-772, University of Iowa Legal StudiesResearch Paper No. 13-32. Electronic copy available at http://ssrn.com/abstract=2320030 [last accessed 14 December 2015].

3 The abbreviation in the name of Australia’s biggest listed litigation funder, IMF Bentham, which today is best known for its funding of class actions,stands for Insolvency Management Fund.

http://www.redbreast.com

http://ssrn.com/abstract=2320030


return for a share of the proceeds of the suit.4 While nolonger a real issue in Australia,5 the US, and the UK,6 inHong Kong litigation funding is potentially still a crime.However, Hong Kong courts seem consistently to make anexception for litigation funding used by administrators inbankruptcy cases.7

ControlIn common-law jurisdictions, the parties to the litigationfunding agreement should be careful to avoid granting thelitigation funder control over the suit. Though in general thefunder may be given some say in important decisions,control should predominantly remain with the litigant.However, there are major differences between jurisdictions.Australian courts have taken a very liberal approach,permitting situations in which the liquidator had to obtain thefunder’s approval before applying for a trial date, briefingcounsel on the trial, settling or discontinuing the claim, orappealing against a final judgment.8 English courts aremuch more restrictive.9

Joint interestGiven that the claimant and the litigation funder are in asense joint venture partners that need each other to achievethe best possible result, it is crucial that the fundingagreement ensures the parties maintain a joint interest in theoutcome of the litigation throughout the process. In

jurisdictions where non-privileged communications arediscoverable, the parties should furthermore ensure thatcommunications with the funder fall under client-attorneyprivilege, for example by entering into a joint interestagreement early on.

Civil-law jurisdictionsIn most jurisdictions in continental Europe litigation fundingis plainly allowed. The issue of control over the suit alsoseems to be less precarious in civil-law countries, perhaps,in the Netherlands and Germany for example, owing to thewidespread use of premium-based legal costs insurance.Legal cost insurers have long required certain rights ofcontrol in the proceedings of which they carry the costs,and this is generally not regarded as an issue.10

ConclusionOnce an exclusively Australian bankruptcy affair, litigationfunding is rapidly finding its way to jurisdictions and otherareas of law across the globe. Third-party litigation fundingis such an obvious solution to the problem of funding theprosecution of large claims in cash-stripped bankruptciesthat it can only be a matter of time before mainlandEuropean lawyers, follow Scott Butler’s suit and first obtainthree quotes from litigation funders before litigating a largebankruptcy claim.

4 Steinitz and Field, “A Model Litigation Finance Contract”, and Marco de Morpurgo, “A Comparative Legal and Economic Approach to Third-PartyLitigation Funding”, Cardozo Journal of International and Comparative Law, 19 (2011), pp. 343-412, p. 389, summary athttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=2167802 [last accessed 27 January 2015]. Lord Mustill in Giles v Thompson [1994] 1 AC 142.

5 In a landmark decision in 2006 in the Fostif case, Australia’s High Court overruled objections based on maintenance and champerty legitimizinglitigation funding in a class action. See Campbells Cash and Carry v. Fostif [2006] HCA 41.

6 In the UK, Lord Jackson, in his Review of Civil Litigation Costs, the report that preceded the so-called Jackson reforms, recognized that third-partylitigation funding promotes access to justice and that it even benefits opposing parties as it tends to filter out unmeritorious cases. Review of CivilLitigation Costs: Final Report (London, 2009), at https://www.judiciary.gov.uk/wp-content/uploads/JCO/Documents/Reports/jackson-final-report-140110.pdf [last accessed 13 December 2015].

7 In re Po Yuen (To’s) Machine Factory Limited [2012] HKCU 816; in re Cyberworks Audio Video Technology Limited [2010] HKCU 974; Berman v SPFCDO I Ltd [2011] HKCU 522.

8 In re Elfic Ltd & Ors v. Macks & Ors [2001] QCA 219 (6 June 2001).9 In re Oasis Merchandising Services Limited [1998] Ch 170.10In fact, Dutch bar rules explicitly take into account the possibility that counsel is acting both for the insurer and the insured, notwithstanding the factthat they might have partially diverging interests.

INSOL BOARD DIRECTORS

Executive Committee DirectorsMark Robinson (Australia) PresidentAdam Harris (South Africa) Vice-President Richard Heis (UK) TreasurerJulie Hertzberg Executive CommitteeClaire Broughton (UK) Executive Director & Company Secretary

Board DirectorsScott Atkins Australia ARITAFellow, INSOL InternationalJasper Berkenbosch The Netherlands INSOLADFellow, INSOL InternationalStephen Briscoe Hong Kong HKICPAPaul M. Casey Canada CAIRPJuanito Martin Damons South Africa SARIPANick Edwards UK R3Brendon Gibson New Zealand RITANZLi Shuguang* PR ChinaLeonardo Morato Brazil TMACatherine Ottaway France INSOL EuropeRon Silverman USA ABIAndrew Thorp BVI RISA (BVI)Mahesh Utttamchandani* The World Bank

*Nominated Director

Past PresidentsIan K. Strang (Canada)Richard C. Turton (UK)C. Garth MacGirr (Canada)Richard A. Gitlin (USA)Stephen J. L. Adamson (UK)Dennis J. Cougle (Australia)R. Gordon Marantz (Canada)Neil Cooper (UK) John Lees (Hong Kong)Robert S. Hertzberg (USA)Sijmen de Ranitz (Netherlands)Robert O. Sanderson (Canada)Sumant Batra (India)Gordon Stewart (UK)James H.M. Sprayregen (USA)

Scroll of Honour Recipients1989 Sir Kenneth Cork (UK)1993 Ronald W. Harmer (Australia)1995 Gerry Weiss (UK)2001 Neil Cooper (UK)2001 Gerold Herrmann (UNCITRAL)2005 Stephen Adamson (UK)2010 Jenny Clift (UNCITRAL)2013 Ian Fletcher QC (UK)

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2167802

https://www.judiciary.gov.uk/wp-content/uploads/JCO/Documents/Reports/jackson-final-report-140110.pdf

https://www.judiciary.gov.uk/wp-content/uploads/JCO/Documents/Reports/jackson-final-report-140110.pdf


Report by Adam HarrisVice President, INSOL InternationalBowman Gilfillan,Cape Town, South Africa

The 2015 Africa Round Table, a project of INSOLInternational and the World Bank Group, took place inCape Town, South Africa at a venue scenicallysandwiched between the ocean and the site of the 2010Soccer World Cup stadium, and presided over by TableMountain.

This year the theme was “restoring financial sector stabilityand restoring growth: the role of insolvency regimes”. Thesessions explored the systemic importance of insolvencyregimes in (amongst other things) maintaining stability inthe financial system. The project hosted a trulyinternational attendance, with representatives from Europeand North America, and from around the continent, -diverse jurisdictions such as Kenya, Lesotho, Liberia,Mauritius, South Africa, Uganda, USA, were allrepresented. The range of topics was broad andimpossible to cover fully in a short note.

In his keynote address, the South African Deputy Ministerof Justice and Constitutional Development John Jeffery,MP pointed out that good, modern insolvency laws had torecognise the wider effect of insolvency, and as far aspossible, provide mechanisms for preserving commercialentities capable of making a useful contribution to theeconomic life of the country.

From the South African government’s perspective, therewere many factors to consider. “A modern and well-developed insolvency law is important”, he noted, “but thisis but one aspect. There are a host of other factors at play:proper implementation is key, as well as creating andmaintaining strong institutions, appropriate accountingand auditing standards, access to courts, capableinsolvency administrators, proper restructuring regimes,enhanced corporate governance in corporations andfinancial institutions and effective regulatory oversight”.

The keynote address resonated with the aims andachievements of the Africa Round Table project. In theyears since the genesis of the project, there have beensome fundamental reforms across the region. The WorldBank’s Mahesh Uttamchandani (Global Lead - Credit

Infrastructure), noted that the interchange of ideas at theART had assisted the process.

It was reported during the peer-to-peer session whichkicked-off the programme that the timing of the ART hadfortuitously coincided with the enactment by the 17 nationfrancophone OHADA countries of new, uniform insolvencylegislation. This was due to come into effect in December2015. Amongst other things, the legislation establishes anew cross-border insolvency regime, based on theUNCITRAL Model Law on Cross-Border Insolvency.

The revised uniform act includes a number of innovations,in line with international best practice. These include:

– Widening the scope of implementation of the newuniform act;

– A new preference for creditors who advance monies tocompanies in distress so as to facilitate theirconsolidation and recovery;

– The establishment of a conciliation procedure tosafeguard companies facing difficulties;

– The establishment of simplified bankruptcy proceduresmore appropriate to smaller business entities;

– The establishment of a legal framework to define theactivities of bankruptcy administrators and experts witha view to ensuring a level of competence, and ethicalbehaviour, and to ensure that they were appropriatelyremunerated;

– The clarification of preference rights of creditors.

In a new format this year, the second day of the AfricaRound Table was introduced as an “open” session atwhich general participation was welcomed. This allowedfor debate and interaction between additional privatesector participants (insolvency and restructuringpractitioners, bankers and academics), and the judges,regulators, policy-makers and practitioners who hadattended the earlier, closed session.

The importance of secured lending was addressed in oneof the sessions. It was recognised that in many Africancountries there were still significant limitations on thecreation, recognition and enforcement of security interestsover movable assets. Prof Andre Boraine of the Universityof Pretoria, who moderated the panel, contextualised thediscussion by explaining the various types of securityavailable.

DOCA Held to Extinguish Secured DebtsINSOL Africa Round Table 2015


Setting the scene from the lender’s perspective, ChristoFaul of Standard Bank pointed out that the South Africanbanks in fact placed little reliance on movable assets as anappropriate source of collateral. This was because of thelikely diminution in value over the useful life of the assets,and the difficulties experienced in realising the assets.

The position in Mauritius (described by PwC’s RajeevBasgeet as a “tax-friendly jurisdiction and gateway toinvestment in Africa and India”), was highlighted. TheMauritian system provides for fixed and floating charges.Rajeev emphasised the due diligence required fromlenders. “Know your borrower” should be the catch-phrase.

Comparing the position of most SME’s, Alejandro Alvarezde la Campa (the IFC’s Global Product Leader, SecuredTransactions and Collateral Registries), pointed out thatWorld Bank surveys had revealed that 80% of the asset-base of the average SME comprised of movables. But,many African jurisdictions had outdated or fragmentedsystems which made ascertaining the priorities ofcreditors difficult. Some countries had implementedreforms in this area, and had dealt with the complex issueof security interests in movable property. There were somenotable success stories such as Ghana and Liberia, whichhad implemented registers of securities. It was essential(as the international best-practice revealed) that theaccess to the registry had to be affordable, accessible,and easy for the holder of the rights to record its interests.

A highlight of the programme was the judicial panel, chairedby the Hon Mr Justice Alastair Norris of the Royal Courts ofJustice, London, Vice-chancellor of the County Palatine. Thisexplored amongst other aspects, the issues of insolvencyand judicial capacity. In setting the scene, the question thatwas raised was whether the objective of the insolvency lawwas “healing the body or buryingthe corpse”!

From their perspective, four policy principles which thejudiciary would like to see were:

• The encouragement of entrepreneurs without the fearthat failure would blight the rest of their commerciallives;

• That when there was a failure, the system should permitsuch failure;

• That in the event of failure, those closest to the assetsshould not grab them;

• That when advantage had been taken, there should bean opportunity to rectify this.

The debate covered a broad range of topics, looking at theprocedural context (what are the rules and how well do theywork?), the legislative context (the role of the supportinglegislation), implications for judges, training and judicialskills (who was appointed, and when and how would theybe trained), and whether specialist courts, (or a specialistlist within such courts) was an appropriate system.

Against the background of the fact that a number ofjurisdictions, including South Africa, were experiencingfailing banks and financial institutions, the session on bankinsolvency highlighted the landscape of risks peculiar tothe African context. The dependence upon commoditiesand the risks of fluctuation in commodity prices featureshigh on the agenda. Stefan Smyth (PwC, Cape Town),emphasised the importance of understanding the qualityof a bank’s assets. Regulation was important, but shouldnot be left until there was a fire at the door. As important as regulation was, it was noted that over-regulation had to be avoided, so as not to risk achieving the “stability of the graveyard”. Lynn P. Harrison 3rd (Fellow, INSOLInternational, Curtis Mallet-Prevost, Colt & Mosel LLP)emphasised the need for transparency and confidence inthe system. This meant that amongst other things, thetoolkits available to regulators had to be evaluated.

The attendees at the African Round Table enjoyedexpansive and lively debate, good networking,camaraderie and interaction at the coffee-breaks, socialevents and dinners, and despite Cape Town’s bestendeavours to lure the delegates away, most stayed andparticipated throughout.

It was an outstanding event, which was made possible bythe generous support of our sponsors - PlatinumSponsors: DLA Piper; PwC; Gold Sponsors: Lex Africa;Standard Bank; Faculty of Law, University ofJohannesburg; Werksmans Attorneys; Coffee BreakSponsor: Centre for Advanced Corporate and InsolvencyLaw, University of Pretoria. Finally, thanks to BowmanGilfillan Africa Group, who hosted the dinner, which all thedelegates thoroughly enjoyed.

Accra, Ghana, will host the ART in 2016. For furtherinformation please contact Penny Robertson [email protected]



By Antonia Menezes1

Fellow, INSOL InternationalandWill Paterson2

The World Bank Group

The findings, interpretations, and conclusions expressed inthis work are entirely those of the authors and should not beattributed in any manner to the World Bank, its Board ofExecutive Directors, or the governments they represent.

IntroductionOn September 10, 2015, seventeen African countries3,members of the Organisation pour l’Harmonisation enAfrique du Droit des Affaires or the Organization for theHarmonization of Business Law in Africa (OHADA),adopted a significantly revised and modernized UniformAct on Insolvency4 (the Insolvency Act) in Côte d’Ivoire. TheWorld Bank Group provided support to both the expertdrafting team and the regional OHADA institutions, as wellas acted as the interface between the regional institutionsand many national governments in order to encouragethese developments in insolvency and creditor/debtorregimes. The Insolvency Act entered directly into force in allOHADA countries on December 24, 2015, and marks a

strong improvement in restructuring and liquidationregulation across the region.

Background on OHADAOHADA was formed by Treaty in 1993 with the objective ofharmonizing business laws amongst its members to promotean enabling legal and judicial environment for their economicactivities. Membership in the organization is open to anymember state of the African Union or any other state that isinvited to join by all existing OHADA state parties. To date,primarily francophone West African States, with civil law legalsystems, have joined OHADA, with some exceptions.5 Thereare currently nine uniform acts “Uniform Acts” in differentareas of commercial law, which have entered into force in allOHADA member states (Member States).6

The institutional organs of OHADA comprise theConference of Heads of State, the Council of Ministers andthe Permanent Secretariat. OHADA also has its ownCommon Court for Justice and Arbitration (CCJA).7 TheCCJA hears final appeals of cases involving theinterpretation of the uniform laws for all Member States, andonce a case is brought before the CCJA, the nationaljudicial process is suspended. There is also a RegionalCollege for Legal Officers (ERSUMA).8

Unlike many other regional trading blocs, what makesOHADA’s regulation particularly effective is that its laws are

directly applicable in all seventeenOHADA countries without theneed to adopt them domesticallyvia implementing legislation. Theysupersede any contradictorynational laws, although states areentitled to adopt additionallegislation to the extent that thisdoes not contravene any of theprovisions set out in theharmonized Uniform Acts.

Many OHADA countries haverelatively weak insolvencyregimes. Indeed, prior to the mostrecent reforms, several countriesin the OHADA region werereported as having “no practice”regarding both commercialforeclosure and insolvencycases.9 Those that did havecases experienced lengthy andcostly proceedings in court, withvery limited recovery.10 As shownin the diagram,11 most creditors are reported as ultimatelyrecovering, on average, less 15

One Insolvency Law, Seventeen Countries:A Brief Overview of the Revised OHADA Uniform Act on Insolvency

1 Antonia Menezes is a Senior Financial Sector Specialist in the Finance & Markets Global Practice of the World Bank Group and Fellow, INSOL International.2 Will Paterson is a Consultant in the Finance & Markets Global Practice of the World Bank Group.3 Benin, Burkina Faso, Cameroon, Central African Republic, Chad, the Comoros, Congo, Côte d’Ivoire, Democratic Republic of the Congo, Equatorial Guinea, Gabon, Guinea Bissau, Guinea, Mali, Niger, Senegal and Togo.4 L’Acte uniforme portant organisation des procedures collectives d’apurement du passif5 For instance, Cameroon is English speaking, Guinea Bissau is Portuguese speaking and Equatorial Guinea is Spanish speaking. Cameroon has a mixed civil-common law legal system.6 These are: general commercial law, company law, debt collection law, accounting standards, secured transactions law, insolvency law, accounting law, arbitration law and the contract for the carriage of goods by road.7 The CCJA is the final court of appeal against decisions rendered on the uniform acts by national courts of the member states. 8 ERSUMA trains professionals in OHADA and is a center for legal research9 These ‘no practice’ countries are recorded following the Doing Business methodology, which states “If an economy had zero cases a year over the past five years involving a judicial reorganization, judicial liquidation or debt enforcement procedure (foreclosure or receivership), the economy receives a “no practice” mark on the time, cost and outcome indicators.” See: www.doingbusiness.org10 See: <http://documents.worldbank.org/curated/en/2014/06/19625203/doing-business-2014-organization-harmonization-business-law-africa-ohada-doingbusiness-2014-organization-harmonization-business-law-africa-ohada>11 Data from World Bank Doing Business Report 2016 <www.doingbusiness.org>

http://www.doingbusiness.org

http://documents.worldbank.org/curated/en/2014/06/19625203/doing-business-2014-organization-harmonization-business-law-africa-ohada-doing-business-2014-organization-harmonization-business-law-africa-ohada



http://www.doingbusiness.org


cents on the dollar in the region.12 OHADA countries alsoexperience a large level of informality. For example, inBenin, over 90% of the population was reported as workingin the informal sector, with 98% of all firms being owned byindividual entrepreneurs.13

The amendments to the Insolvency Law follow reforms toseveral other uniform laws, including the Secured LendingLaw and the General Commercial Law, which were bothamended in 2010. One of the goals of these reforms was tohelp address the high levels of informality and lack ofaccess to credit for small businesses and individuals in theOHADA region. For example, in the Secured Lending Law, itis now possible to use reputational, traditional and non-traditional collateral in order to help individuals and micro,small and medium enterprises (MSMEs) gain access tofinance as well as more favorable and competitive financingoptions. The General Commercial Law created a new legalentity called the “entreprenant”, specifically providingincentives to small businesses to formalize.14

This goal was carried through in the insolvency reformobjectives. Together with the Secured Lending Law and theDebt Collection Law (which has not yet been reformed),these laws form the backbone of the legal framework foraccess to credit for businesses and individuals in OHADAand can be expected to play a crucial role in mitigatinginvestor and creditor risk, reducing the cost of credit andhelping mitigate the instability that is potentially caused byhigh levels of non-performing loans. In particular, having apredictable insolvency system provides lenders with ahigher degree of confidence that when a business is unableto pay its debts, appropriate procedures will be followed tomaximize the value of the business.

Development of the new legislationThe previous 1998 uniform law on insolvency was widelybelieved to be lacking key features of a modern insolvencyregime, particularly as regards modernized reorganizationproceedings and the fair treatment of creditors. Further, theold law relied very heavily on formal judicial processes, wi thlittle flexibility built-in for debtor-creditor negotiation.

The World Bank Group, including the International FinanceCorporation (IFC), provided technical support to theOHADA Secretariat and the expert legislative drafting teamin revising the Act in line with best practices, as well asencouraging OHADA States at a national level to adopt thenew law, and liaising with other international standard-setting organizations, such as United Nations Commissionon International Trade Law (UNCITRAL) to ensure that keyprovisions were included in the revised Act. In particular,regard was had to the World Bank Group’s Principles onInsolvency and Creditor/Debtor Regimes515 and theUNCITRAL Legislative Guide.16 Some of the notablereforms are set out below.

Key Features of the New Uniform ActThe new OHADA legislation implements many internationalbest practices. Some of the key features of the Act include:

a) Broadened scope of the lawThe new Act clarifies and broadens the scope of the law.The earlier law applied to every natural person17 or trader18,

every legal person (non-trader) under private law19 andevery public enterprise constituting a legal person underprivate law.20

The new Act clarifies that it is applicable to every naturalperson undertaking an independent professional, civil,commercial, artisanal or agricultural activity, as well as everylegal person in private law, including publicenterprises.21Moreover, the law applies to legal entities thatare normally subject to specific regulatory regimes, such asbanks, credit and micro-finance institutions as well asinsurance and reinsurance bodies, but only to the extentthat no specialized regime already exists.22

b) More flexible pre-insolvency procedures to encouragesaving viable businesses One of the innovations of the Act is to provide preventative,flexible options to individuals and businesses before theyare in a state of insolvency via the new conciliationprocedure. This upholds one of the new stated objectives ofthe Act, which is, to the extent possible, to “preserveeconomic activity and employment in debtor companies”.23

Similar to the French conciliation procedure, the goal ofconciliation in the Insolvency Act is for the debtor andcreditor(s) to come to a voluntary, out-of-court settlement tohelp prevent further financial difficulties and erosion ofassets.

Conciliation is requested by the debtor (or jointly by thedebtor and one or more creditors). In order to ensure thatthe proceedings can be concluded in a timely mannerwithout the unnecessary dissipation of assets, the Actprovides that conciliation will not last longer than threemonths, although proceedings can be extended by oneadditional month in certain circumstances24 and the debtorcan also request their termination at any time.25Proceedingsare confidential,26 although in order to help ensureenforceability of the settlement agreement between theparties, it can either be submitted to a notary public orapproved by the competent court.27 The conciliator mustfulfil certain criteria to ensure his independence andimpartiality.28

It should be noted that, unlike in France, the Act retains bothconciliation and règlement préventif as pre-insolvencyprocedures. The primary difference with règlement préventifis that proceedings are more formal, with a stay imposed oncreditors, and accordingly, proceedings are no longerconfidential. Moreover, unlike in the original insolvency law,whereby the stay was only imposed on certain creditors, thestay is now imposed on all creditors to ensure fairness andequality of treatment.29

c) Revision to the priority of creditors in distribution ofassetsAs discussed above, the Act encourages the reorganizationand continuity of viable businesses and this includesreforming the priority of creditors in the scheme of distributionof assets. In particular, for those creditors who provide “newmoney” or assets in the context of a voluntary workoutagreement (conciliation or règlement préventif) or areorganization plan (règlement judiciaire) they will be entitledto a priority over other creditors in liquidation proceedings.30The Act also provides a new definition for employees

12 Ibid.13 See: <https://www.wbginvestmentclimate.org/results/upload/Methodological- note-IE-Entreprenant-status-Benin-Oct31-ext.pdf>14 https://www.wbginvestmentclimate.org/advisory-services/regulatory- simplification/secured-transaction-and-collateral-registries/ohada- facilitates-access-to-finance-in-africa.cfm15 http://siteresources.worldbank.org/EXTGILD/Resources/5807554- 1357753926066/2015_Revised_ICR_Principles(3).pdf16 http://www.uncitral.org/uncitral/en/uncitral_texts/insolvency.html17 Personne physique (Article 2)18 Personne morale commercante (Article 2)19 toute personne morale de droit privé non commerçante (Article 2)

20 toute entreprise publique ayant la forme d’une personne morale de droit privé (Article 2)21 Article 1 (1)22 Article 1(1)23 Article 124 Article 5-325 Article 5-826 Article 5-327 Article 5-1028 Article 5-429 Article 930 Article 5-11

https://www.wbginvestmentclimate.org/results/upload/Methodological-note-IE-Entreprenant-status-Benin-Oct31-ext.pdf



https://www.wbginvestmentclimate.org/advisory-services/regulatory-simplification/secured-transaction-and-collateral-registries/ohada-facilitates-access-to-finance-in-africa.cfm





http://siteresources.worldbank.org/EXTGILD/Resources/5807554-1357753926066/2015_Revised_ICR_Principles

http://siteresources.worldbank.org/EXTGILD/Resources/5807554-1357753926066/2015_Revised_ICR_Principles

http://www.uncitral.org/uncitral/en/uncitral_texts/insolvency.html


holding a super-priority, which conforms to the definition inthe Secured Lending Law, namely capping wages owed toemployees according to national laws, but limited to twelvemonths’ salary preceding the opening of reorganization orliquidation proceeding.31

d) Common regulation for insolvency practitioners As discussed above, both the efficacy and the challengewith OHADA laws is that they provide uniform regulation inall seventeen States, despite the relative differences inculture, size of economies and institutional infrastructure.For these reasons, one of the key developments in the law,which was extensively discussed between the states duringthe negotiations, is provision for insolvency practitionerregulation in a manner that is common and consistentacross all Member States.

Specifically, the law provides for a registry to be developedin each Member State whereby insolvency practitioners(mandataires judiciaires) need to be registered before theycan act in restructurings or liquidations.32 Moreover, the lawalso sets out the minimal conditions necessary to beregistered, namely, (1) being fully competent to exercisecivil and civic rights; (2) not having faced any disciplinarysanction, suspension or criminal conviction (other than awarning or minimal sentence not related to economic orfinancial matters that would be incompatible with the role ofan insolvency practitioner); (3) be an accountant or otherprofessional as specified in the national legislation; (4) provea tax domicile in the relevant jurisdiction; (5) providecharacter references to the relevant authority.33 EachMember State can add to these requirements.

The national registry of insolvency practitioners must be published in the Official Journal of each State as well as the Official Journal of OHADA, and must be promptlytransmitted to all Member States. Decisions to admit or refuse admission to the registry must be specified andcan be appealed in the relevant national jurisdiction.34Provisions relating to upholding ethical standards anddealing with conflict of interests are also set out in thelaw.35Each State is responsible for supervising andmonitoring their respective insolvency practitioners36 andthe law sets out a variety of possible disciplinarymeasures.37 The relevant jurisdiction of therestructuring/liquidation is also responsible for setting thescale for remuneration of the insolvency practitionersaccording to the respective national rules, which will takeinto account the time taken and difficulty in administeringthe estate as well as the number of creditorsinvolved.38Therefore, although these provisions mark asignificant development in OHADA’s insolvency regime, theimportance of implementation and further regulation at anational level should not be underestimated in order toensure a significant impact.

e) Simplified regulations for small enterprises The new simplified regulations for MSMEs in the InsolvencyAct are particularly noteworthy. They were developed inrecognition of the fact that most businesses in the OHADA areMSMEs, and that the longer it takes to address their financialdistress, the less likely it is that there will be a possibility tosave the business or recover any assets because of theirrelatively small size. Moreover, putting in place cheaper andsimpler procedures with the possibility of business rescuewas considered an incentive for formalization, which, asmentioned is a major problem in the region.

There is no agreed best practice definition as to what constitutes the size of a MSME, and the OHADA Statesultimately agreed that in the context of their economies, a“small business” would constitute a proprietorship,

partnership or other legal entity having less than or equal to20 employees and a turnover not exceeding 50 million francsCFA (around US$80,000) in the 12 months prior toproceedings.39 Moreover, these MSMEs have the option tochoose simplified proceedings, but are not obliged to do so.40

These simplified proceedings apply to three of the fourprocedures set out in the law, namely, règlement préventif,redressement judiciaire and liquidation des biens. They aresimplified insofar as many of the formalities, such as havingto present numerous documents to the court or hold varioushearings, are no longer necessary in order to facilitatespeed. For example, the law provides that instead of 3months for the redressement judiciaire (reorganization)process, the simplified reorganization proceedings must becompleted in 2 months with a possible extension of 15days.41 There is no vote on the plan and no creditors’meeting. Rather the plan is communicated to the creditors bythe trustee. If the creditors take a ‘hair-cut’ this must bespecifically consented to, and the plan is approved by court.

f) Adoption of the UNCITRAL Model Law on Cross-BorderInsolvencyCross-border insolvency regimes typically regulate thetreatment of financially distressed debtor businesseswhere such debtors have assets or creditors in morethan one State than where the insolvency is takingplace. The 1998 insolvency regime of OHADA providedfor cooperation between the Member States, but waslimited primarily to cooperation between the insolvencypractitioners and a protocol to deal with concurrentproceedings in different jurisdictions.

The revised Insolvency Law not only strengthens theseprovisions within the OHADA region, but also adopts theUNCITRAL Model Law on cross-border insolvency toregulate cross-border insolvencies between the OHADAMember States. They are the first pure francophonejurisdictions to adopt the Model Law, and the World Bankplay a key role in explaining the importance of theseprovisions for jurisdictions seeking to attract foreigninvestment. The focus of these cross-border provisions is toencourage cooperation and coordination between thejurisdictions and marks a strong signal to foreign investorsthat the OHADA region will seek to maximize the value ofassets of financially troubled businesses throughrecognized best practices of recognition and cooperation.

ConclusionThe revised OHADA Uniform Insolvency Act represents asignificant milestone in the Organization’s history, with thepromise of a much improved, modernized insolvencyframework. Such a framework has the potential to go a longway to foster economic development within the regionthrough a stronger credit environment. In particular, theinnovations address some of the key concerns in the regionregarding business distress, namely, encouraging fair andequitable treatment of creditors; promoting business rescuefor financially distressed but viable businesses; meeting theneeds of small businesses that might be tempted to by-pass formal proceedings because of the cost and time;strengthening professional standards for insolvencypractitioners and promoting foreign investment through amore certain cross-border regime. The true effects of therevised Act will only be able to be seen followingimplementation of key provisions in each nationaljurisdiction. However, as OHADA passes its 22ndanniversary since signing the initial Treaty, this law can besaid to have met its initial objective, that of putting in placebusiness laws that are “harmonized, simple, modern and adaptable”.

31 Article 1-332 Article 4-133 Article 4-234 Article 4-3

35 Article 4-436 Article 4-637 Article 4-938 Article 4-17

39 Article 1-340 Article 1-241 Article 24-4


INSOL International PRC Half Day Seminars 2015

Report by Prof. Li ShuguangBankruptcy Law and Restructuring Research Center of China University of Politics Science and Law andINSOL International Board DirectorBeijing, China

INSOL international PRC half day seminars weresuccessfully held in Shanghai on 30th October and Beijingon 2nd November 2015. It was the second time in Shanghaiand the fourth time in Beijing. With the topic of cross-border insolvency and restructuring, scholars, lawyers,officials, accountants and judges shared their preciousexperiences and perspectives actively.

In Shanghai, Seminar Co-Chairs Andrew Koo from EY, and Prof. Li Shuguang, gave welcome remarks. In Beijing,Seminar Co-Chair Helena Huang from King & WoodMallesons, and INSOL Immediate Past President JamesH.M. Sprayregen from Kirkland & Ellis LLP, welcomed theattendees.

The technical programme started with the session “Year inReview” looking at the current economic situation andpolicies in PR China, as well as the development inlegislation and main cases of the year. In Shanghai, Prof. Liset the scene by making a speech on annual review. Hereferred to the fourth plenary session of the 18th CPCCentral Committee and the Rule of Law, disaster of the stockmarket, transformation of the local government financeplatform and the crisis of trust payment. These events allmade an impact on the Chinese bankruptcy andrestructuring. He also talked about the updated rules, suchas Deposit Insurance Regulations, Securities Law (DraftVersion) and Judicial Interpretation of the Civil ProcedureLaw. He introduced several main cases of the year, such asSino-Environment Technology Group case, Delisting andReorganization of Nanjing Tanker Corporation, Delisting ofChina National Erzhong Group Co. and crisis of Kaisa Groupand Chaori case. Andrew Koo then analyzed the currenteconomic situation, the increased rate of bad debt in bank and the business environment that still is not in a good condition. Next, Mr. Jingtao Liu from Zhonglun Law Firm (Qingdao), talked about Bankruptcy andReorganization: Issues of Shipping Industry. He listedseveral shipping companies in bankruptcy. By showing theconflict per se between the two proceedings and disposal ofarbitration under Chinese Enterprise Law, he comparedbankruptcy law and international arbitration. He suggestedan amendment to nullify arbitration clause not yet initiatedafter bankruptcy case accepted by court. The fourth panelistwas Judge Tang Liming from Shanghai First IntermediatePeople’s Court. Judge Tang shared her experience on how

to cope with bankruptcy cases from a judge’s point of view.

In Beijing, after Prof. Li’s review, Mr. Sprayregen gave theoverview from the US market perspective. With the stableeconomic recovery, the American economy has seen anuptrend, especially the energy sector. At the same time,many non-performing assets have been sold to foreigners,including Chinese. The next panelist was Wu Zhuo, theofficial in the legal department of People’s Bank of China.Wu introduced the Deposit Insurance Scheme of China,including its legislation history, range of protection, depositinsurance fund and features. At the end of this session,Zheng Zhibin from King & Wood Mallesons, said that theBankruptcy Law would become more and more importantin next 10 years. He covered the features of recentbankruptcy cases in China and some problems facingChinese practitioners nowadays.

The second session entitled “Opportunities or Challenges– Restructuring in the PRC” was presented by Hao Zhaohuifrom King & Wood Mallesons and Tiffany Wong fromKPMG, moderated by Xin Zhiqi of King & Wood Mallesonsin Shanghai and Wang Fuxiang, King & Wood Mallesons inBeijing. Based on the challenges and opportunities ofdomestic enterprises in cross-border restructuring cases,they looked at what concerned the creditors the most incross-border cases and offered their advice on legalregime. They also discussed in detail the Chaori case. InShanghai, the panelists were joined by Judge Lu Xiaoyanof Wuxi Intermediate Court, who added the judicialperspective.

The third session was entitled “Identification: How to crossthe first chasm of cross-border bankruptcy involvingmainland China”. Session chair Kevin Song from BorrelliWalsh was joined by Richard Woodworth from Allen &Overy, as well as Judge Fu Wang of Shanghai No.2Intermediate People’s Court and Allan Ye from Jun He LawFirm in Shanghai and Dan Pingyuan from ZY Partners andJames Sprayregen in Beijing. They discussed relevantissues in combination with their own experiences, focusingon the identification difficulty in cross-border bankruptcy,i.e. different judicial systems, limited knowledge, lack ofexperience and confrontations and conflicts. They alsoexplored the misconception of mainland judicature onrecognition of representative of foreign company, which willbe guidance in practice.

At the end, Prof. Li concluded the seminars and as INSOLBoard Director welcomed everyone to future conferencesin Dubai and the Tenth World Quadrennial Congress inSydney in 2017.


The recent amendment of Spanish public sector contracts legislation (hereinafter “TRLCSP”)1 has dramaticallychanged the liquidation process of the so-calledResponsabilidad Patrimonial de la Administración(hereinafter “RPA”).

1. What is the RPA and why is it so important in thecontext of the insolvency proceedings of aconcessionaire company in Spain?

The RPA is the amount to be paid by the awardingadministration to the concessionaire as compensation forthe investment that was necessary to complete theinfrastructure which, in the event of the early termination ofthe concession, will revert to the administration before thescheduled termination date of the concession. Were thereversion of the infrastructure takes place as aconsequence of the scheduled termination of theconcession, since the concessionaire has had theopportunity to amortise its investment, there would be noneed to pay RPA. On the contrary, in the event that theconcession contract is subject to early termination, theconcessionaire loses its opportunity to benefit from theconcession and therefore needs to be compensated forthe non-recovered investment.

The declaration of insolvency of a concessionaire does notautomatically entail the termination of the concessioncontract, since one of the objectives of Spanish insolvencylegislation is to provide for the survival of the insolventdebtor and the continuation of its activity. However theawarding administration has the right to decide whether it isbest for the public interest to continue with the concessioncontract or to terminate it. Obviously, if the concession is notterminated, then the right for claiming the RPA does notcome into effect. But even if the concession contract is notresolved at first, if the debtor’s restructuring fails and it goesto liquidation, the awarding administration will be obliged toterminate the concession contract and, in that scenario theright to claim the RPA would come into effect.

The amendments of the TRLCSP are basically aimed ataddressing this scenario which has potential adverse effects

for the administration (and eventually could increasethe nation’s public deficit).

2. Which are the actual changes that have been introduced?

The amount of the compensation to be receivedby the concessionaire has always depended onwhether the concession contract is terminatedearly due to a breach of the awardingadministration or not. But now, differencesregarding liquidation of the concession in the two

scenarios not only vary but are profoundly different.

New article 271 TRLCSP regulates the liquidation of theRPA in those cases in which the concession contract hasbeen terminated early due to a breach of the awardingadministration. In these cases, the RPA will comprise thevalue of the works, expropriated plots of land and assetsacquired necessary to complete the infrastructureattending to their grade of depreciation. The noveltyintroduced is that contrary to the former regime where forcalculating the depreciation, provisions contained in theconcession contract and time resting for the scheduledtermination were taken into account, now; only the straight-line method is used for its calculation.

In addition, the concessionaire will be entitled to assert aclaim for damages against the awarding administration incase: (i) the concession is repurchased by theadministration; (ii) the concession is terminated forreasons of public interest; or (iii) the concession cannot beoperated due to actions taken by the administration afterthe concession had already been awarded. In thesecases, the awarding administration will have tocompensate the concessionaire for the damages sufferedand the RPA will therefore be calculated taking intoaccount loss of profit. Such loss of profit will then becalculated taking into consideration the average of theearnings before taxes of the concessionaire during asmuch time prior to the liquidation of the concession as theperiod remaining under the concession contract term andthe depreciation of the plots of land and assets. If theyears already elapsed are less than the years still to comeuntil the concession term ends, then the calculation willonly take into account the years that the concession hasbeen in force. The discount rate applicable will be theaverage weighted capital cost rate of the last financialaccounts of the concessionaire.

The liquidation of the RPA when the concession contract isterminated early due to causes not attributable to theadministration has suffered the most dramatic changes.The RPA in this scenario will be the market value of theconcession. Indeed, new article 271 bis TRLCSP requires

New Rules for the Liquidation of Concessions Awarded to Companiesthat become Insolvent

By Marta Vizcaino and Bernardino Muñiz Hogan LovellsInternational LLP Madrid, Spain

1 Royal Legislative Decree 3/2011, of 14 November 2011, approving the consolidated text of the Law on Public Contracts by the Law 40/2015, of 1 October 2015, on the Legal Regimen of the Public Sector (“Law 40/2015”)


the awarding administration to start a new biddingprocess for the concession which will be subject to theterms and conditions applicable to the initial concessioncontract with the only exception of the price which will thenbe the only awarding criteria that will be taken into accountin the bidding process. Accordingly, the RPA to be paid tothe former concessionaire will be the exact price that theconcession fetches in the auction.

But what happens if the concession is not awarded in thefirst public auction? Then the value of the concession and,thus, the amount of the RPA to be paid to the formerconcessionaire will be the price resulting from a secondauction in which the initial bidding price of the first auction(calculated according to a formula that takes into accountthe estimated cash flows of the concession) will bereduced by half. That reduced bidding price will be theamount corresponding to the RPA if the second auction isalso unsuccessful. However, the concessionaire or itscreditors representing more than the 5% of the debt canfind, within 3 months, a third party willing to pay at least theinitial bidding price from the second auction and thus theymight increase the amount of the RPA.

3. What does all of the above have to do with theinsolvency of the concessionaire?

It is very simple; the new regulation treats the insolvency of the concessionaire as an early termination whose

cause is not attributable to the administration. Therefore, incase where a concessionaire is declared insolvent and theRPA is triggered either because the awardingadministration decides to terminate early the concessioncontract or because it has to be terminated early due tothe initiation of the liquidation phase, the formerconcessionaire will receive as RPA the market value of theconcession equal to the price resulting from a new biddingprocess.

Taking into account the fact that the insolvency of theconcessionaires of public infrastructures such as tollhighways has been mostly triggered because, due to theeconomic crisis, there is a huge shortfall between theestimated income of the concession at the time it wasawarded and the real income, the conclusion is simple: the price of the concession in the new bidding process will be much smaller than the amount of the RPA thatwould correspond to the non-amortised investment of the concessionaire. The awarding administration willtherefore benefit from this new regime in almost everysingle case.

However, for the time being, all those creditors withinterests in insolvent Spanish concessionaire companiesmay remain calm; this new liquidation process for the RPAonly applies to concession contracts awarded after 23October 2015.

INSOL INTERNATIONAL

RRIICCHHAARRDD TTUURRTTOONN AAWWAARRDDSponsored by:

Richard Turton had a unique role in the formation and managementof INSOL Europe, INSOL International, the English InsolvencyPractitioners Association and R3, the Association of BusinessRecovery Professionals in the UK. In recognition of hisachievements these four organisations jointly created an award in memory of Richard. The Richard Turton Award provides aneducational opportunity for a qualifying participant to attend theannual INSOL Europe Conference.

In recognition of those aspects in which Richard had a specialinterest, the award is open to applicants who fulfil all of the following:

• Work in and are a national of a developing or emerging nation;• Work in or be actively studying insolvency law & practice;• Be under 35 years of age at the date of the application;• Have sufficient command of spoken English to benefit from theconference technical programme;

• Agree to the conditions below.Applicants for the award are invited to write to the address belowenclosing their C.V. and stating why they should be chosen in lessthan 200 words by the 1st July 201 . In addition the panel requeststhat the applicants include the title of their suggested paper asspecified below. The applications will be adjudicated by a panelrepresenting the four associations. The decision will be made by the

August 201 to allow the successful applicant to co-ordinatetheir attendance with INSOL Europe.

The successful applicant will

• Be invited to attend the INSOL Europe Conference, which isbeing held in from 201 , all expenses paid.

• Write a paper of 3,000 words on a subject of insolvency andturnaround to be agreed with the panel. This paper will bepublished in summary in one or more of the Member Associations’journals and in full on their websites.

• Be recognised at the conference and receive a framed certificateof the Richard Turton Award.

Interested? Let us know why you should be given the opportunity toattend the IE Conference as the recipient of the Richard TurtonAward plus an overview of your paper in no more than 200 wordsby the 1st July to:

Richard Turton Awardc/o INSOL International6-7 Queen StreetLondonEC4N 1SPE-mail: [email protected]

Too old? Do a young colleague a favour and pass details of this opportunity on.

Applicants will receive notice by the August 201 of thepanel’s decision.



SMALL PRACTICE FEATURE

Remuneration of Officeholders: Some International Comparisons1

Office holders in insolvent winding up proceedings are

inevitably in an invidious position. They are often, where

there are no assets, required to undertake significant

amounts of work without guarantee of payment. Even

where there are assets the level of remuneration is

frequently criticised by stakeholders in the process, such

as creditors, politicians and/or the media. In some

jurisdictions, including the United Kingdom, lack of

creditor engagement is sometimes (at least partly) blamed

by politicians and the media on low returns for unsecured

creditors; which is also sometimes blamed on office

holder’s fees. In the meantime, even in traditionally office

holder friendly jurisdictions like the UK, we are beginning

to see certain judicial activism with some judges

expressing disquiet about remuneration levels, in some

instances, possibly because of a lack of training about

involvement in the process.

Many jurisdictions have developed different approaches to

the setting and approval of office holder’s fees including:

the way in which they are agreed, for example, by the

court, the committee, the creditors and/or, assessors; the

basis of remuneration such as whether it is on a fixed fee,

hourly rate or percentage basis; the principles governing

the determination of remuneration; the process for

payment of remuneration; the record keeping

requirements imposed by the courts and / or by local

regulations; and who determines the office holder’s

agent’s fees and any potential liability for an agent’s fees if

they are later found to be excessive.

While there has been research on a European level, there

is little in the way of analysis of the lessons that could be

learned from different jurisdictions. The INSOL

International Small Practice Group is undertaking a project

to compare officeholder remuneration on an international

level. It is hoped that this technical project, by analysing

the experience of different jurisdictions, will provide

helpful information for practitioners and those engaged in

insolvency law reform in domestic and international

contexts. It is hoped that this will in due course further lead

to fee setting regimes which are transparent and robust,

providing proper reward to office holders, relative to the

risk and time and expertise being exercised, as well as the

returns brought to creditors, which at the same time can

be shown to be reasonable to other stakeholders such as

creditors and politicians.

Colin Strime: [email protected] Telephone : (+2711) 328-1700 | Telefax: (+2711) 880-2261 | Web: www.fluxmans.com

Knowledge of Insolvency and Business Rescue is something you acquire over time.

An established South African law firm, reputed for expertise, passion and service.

By Eric BaijalINSOL International SmallPractice Issues CommitteeBBM Solicitors, Caithness, Scotland

1 Any practitioners interested in contributing to this project should please contact Louise Jennings, Technical Officer, INSOL International [email protected]


http://www.fluxmans.com



By Scott AtkinsFellow INSOL InternationalChair INSOL Taskforce 2021Henry Davis York,Sydney, Australia

What will the INSOL of the future look like as we movebeyond the next quadrennial conference in Sydney duringMarch 2017 and towards the 2021 quadrennial?

This is the exciting challenge for all INSOL Members andbroader stakeholders and especially for the INSOL Memberscomprising Taskforce 2021.

Reviewing our strategyAs we all read in the last edition of INSOL World, a coreinitiative of INSOL President Mark Robinson is to lead acomprehensive strategic review of INSOL International. Theoutcome of the strategic review process will be finalised thisyear and officially announced and shared with INSOLMembers at INSOL Sydney 2017.

The strategic review process is a significant undertaking ofINSOL – especially given that one of the core principlesunderpinning the process is to ensure that every one ofINSOL’s more than 10,000 Members have an opportunity to express their views about the future shape and directionof INSOL.

Taskforce 2021 and its roleTo facilitate the strategic review process, the INSOL Boardhas formed Taskforce 2021, chaired by Scott Atkins, a BoardMember and Fellow of INSOL and partner of Henry DavisYork (Australia). The Taskforce reports to the INSOL Board.

The Taskforce membership is broad and diverse, withrepresentation from key stakeholder groups and straddlingmost regions across the globe. The Taskforce members are:Scott Aspinall, Barrister of Wentworth Chambers (INSOLFellow, Australia), Cosimo Borrelli, Borrelli Walsh (HongKong), Judge Arthur Gonzalez (retired) New York University,School of Law (USA), Jane Dietrich, Cassels Brock &Blackwell LLP (INSOL Fellow, Canada), Adam Harris,Bowman Gilfillan (INSOL Vice-President, South Africa),Fernando Hernández, Marval O’Farrell & Mairal (Argentina),Ian Mann, Harneys (INSOL Fellow, Hong Kong, Cayman,BVI, Bermuda), Professor Rosalind Mason, QueenslandUniversity of Technology (Chair, INSOL Academics Group,Australia), Derek Sach, Chair, INSOL Lenders Group (UK),Peter Sargent, Past President R3 (UK), Howard Seife,Chadbourne & Parke LLP (Co-Chair G36, USA), NicoTollenaar, RESOR (INSOL Fellow, Europe), Tiffany Wong,KPMG (Hong Kong and China) and Farrington Yates,Dentons (Chair of Fellows, USA).

The purpose of Taskforce 2021 is to formulate INSOL’spurpose, vision and strategy through to 2021. The output isto have a Strategic Plan that frames INSOL’s future successand which provides the pathway for its achievement.

The key responsibilities of the Taskforce are to:• engage with and consult across INSOL Members andstakeholders to listen, understand and gather their viewsas the foundation for formulating INSOL’s future vision,purpose and strategy;• develop the draft strategy for presentation to the INSOLExecutive and then INSOL Board by October 2016; and

• work with the INSOL Board, once the final form of thestrategy is signed-off, to develop an implementationroadmap prior to the President’s presentation of theStrategic Plan at INSOL 2017.

What are the key issues?The breadth of core issues so far identified by the INSOLBoard and the Taskforce is considerable and generallytraverse the following categories:• Vision and purpose;• Membership and in particular growing our membership;• Education and the delivery of education services;• Thought leadership and INSOL’s role as a thought leader;• Technology and innovation; • Future Member services and their delivery;• Alliances and global co-ordination;• Marketing and public relations;• Communication – both within and across INSOL’smembership and externally;• Advocacy;• Governance and the constitutional framework of INSOL• Missionary work and especially INSOL’s investment insupporting the development and reform of insolvencysystems and leading initiatives in under-developed anddeveloping regions and nations; and • Resourcing and funding.How can I be involved?The structure of the Taskforce and its remit has beendeliberately designed by the INSOL Board to ensure thatevery INSOL Member and stakeholder has an opportunity tomake a contribution to the strategic review process.Contributions can be made in a variety of ways – and mosteasily directly to any Taskforce Member – but here are someof the other main channels:

• Through the INSOL website and dedicated emailaddress: [email protected]

• At INSOL Dubai and other conferences: each upcomingINSOL conference will have a dedicated means forproviding ideas and feedback to the Taskforce. The INSOLDubai conference app has a portal for providing feedbackdirectly to the Taskforce. The Taskforce has compiled ashort survey and we would appreciate Members taking afew moments to provide their views and feedback bycompleting the survey while at Dubai. And keep your eyeout for the Taskforce stand at Dubai – there, andthroughout the conference, you will find TaskforceMembers keen to engage and understand your viewsabout the strategic future of INSOL.

• Directly to Taskforce Members: each Taskforce Memberwill arrange to connect with stakeholder groups acrosseach region. But in addition, Members should seek outtheir regional – or other – representative if they have viewsthat they wish to share.

The INSOL Board and Taskforce 2021 members – like allINSOL Members and stakeholders – are excited about thefuture of INSOL and the abundant opportunities for allMembers of the world’s peak insolvency, restructuring andturnaround association. Each of the Taskforce Members arecommitted to ensuring that every INSOL Member has anopportunity to be involved in this process and we lookforward to further updating the progress of our work as 2016unfolds.

Working together to create the future strategy of INSOL



INSOL INTERNATIONAL ACADEMICS’ GROUP

INSOL International College of Mediation

Established in July 2015, the College is now a fullyfunctioning resource for members and the financialcommunity at large: there is no restriction orrequirement for membership to use the College. TheCollege comprises a panel of the world’s leadingjudges, academics, barristers, lawyers and experts inthe field of cross-border and domestic insolvency andrestructuring. Parties wishing to use the College’sresources only need to contact the Chief Executive ofINSOL International, Claire Broughton, by email, to beput in touch with a range of panel members suitablefor the task in hand.

The impetus for the creation of the College was thegrowing realisation that ADR in its various forms, andmediation in particular, has an important role to play inreducing the time and cost of resolving disputes,uncertainties as to quantum or other matters for which,traditionally, litigation would have seemed the onlyanswer. Indeed, one of the main groups ofprotagonists advocating the use of mediation was thejudges who saw scarce resources – court time – beingabsorbed when mediation could have saved time andmoney for all parties.

A key advantage of mediation is its flexibility – theparties together with the mediator can agree, forexample, the costs of the mediation and who will beliable for those costs, the evidence to be put before

the mediator, the timescale for resolution and therights of the parties generally. Indeed, the mediationmay only cover certain facts, such as quantum,leaving a broader litigation to resolve other issues.

There are other reasons mediation may beappropriate. Many jurisdictions have first instancejudges with limited experience of insolvency law butwith no judicial experience in their appellate courts.Other jurisdictions may lack developed moderninsolvency laws leaving the outcome of cases as littlemore than a lottery. The INSOL International Collegecan resolve these problems by offering access tocurrently sitting and retired judges of the highestlevels of expertise and experience.

Other cases may feature important matters ofprinciple but where the case and the parties lack theresources to pay commercial rates or the costsinvolved in litigation. The College is also intended tofacilitate access by parties in developing economiesto international resources which might otherwise bebeyond their financial means.

Further details of the members of the Panel can befound on the INSOL International website athttps://www.insol.org/page/512/insol-international-college-of-mediation

INSOL International College of Mediation – an Update

13 – 15 July 2016 The Grange St Pauls Hotel, London

The programme for the 18th Colloquium to be held inLondon on 13-15 July 2016 is full of cutting edgeresearch into issues of theory and practice ininsolvency, to be presented by prominent academicsand practitioners from Australia, Canada, Germany,Hong Kong, Lithuania, Switzerland, UK and USA, whichwill be relevant to a much wider audience thanacademics alone. Consider making a diary note now.

The registration brochure for the colloquium will beavailable online at the end of January. In the meantimeif you have any questions relating to the programmeplease contact, Tina McGorman [email protected]

Please note that on Monday 11 July 2016, immediatelyprior to the INSOL Academics Colloquium, theBusiness & Law Research Centre of the Faculty ofLaw of Radboud University (Nijmegen, theNetherlands) will host a one day workshop onteaching and research in insolvency law. Theworkshop has received the endorsement, and is beingpromoted to the academic members of INSOLInternational, INSOL Europe and the NetherlandsAssociation for Comparative and InternationalInsolvency Law. The venue of the workshop is the beautiful new Grotius building of the Faculty of Law in Nijmegen, only about an hour and a half by train from Schiphol Airport. For more informationplease contact Michael Veder ([email protected])

INSOL Academics’ 18th Colloquium

https://www.insol.org/page/512/insol-international-college-of-mediation





INSOL World – First Quarter 2016 37

Cross-Border Insolvency Law, International Instruments and Commentary

By Bob Wessels and Gert-Jan Boon, Second Edition (2015) The Netherlands, Wolters Kluwer, xviii + 1018 pp. ISBN: 9789041159878

Review by Prof. Ian F. Fletcher, University College London, UK

The first edition of this exceedingly useful book, published in 2007, was given awarm welcome by the present reviewer. The second edition has been augmentedand enhanced, and much important new content included, thereby reinforcing thebook’s claim to occupy pride of place in the reference collection of practitionerand scholar alike.

In the nine years separating the two editions there has been a significant growthof interest in the subject of cross-border insolvency, partly fuelled by the falloutfrom the GFC but arguably as the natural consequence of the burgeoning ofinternational trade and commerce in an increasingly “globalised” world. Thoseyears have also witnessed an increased output of instruments and texts relating

to cross-border insolvency by regional organisations such as the EU, the EBRD and the Asian Development Bank, andby global institutions such as the World Bank, UNIDROIT and UNCITRAL.

A major challenge for the compilers of a comprehensive collection of such materials is to ensure that all of the mostrecent additions to the corpus are included, while retaining as many as possible of the earlier texts as are likely to beof relevance to those who consult the work. Here the joint authors have exercised a shrewd judgment when omittingsome of the content from the first edition to make room for the new. One major act of exclusion – no doubt arrived atafter considerable deliberation – has been to omit the printed texts of the voluminous body of material generated byUNCITRAL both before and after 2007. Not only the Model Law and its revised “Guide to Enactment”, but also theLegislative Guide with its additional parts concerning enterprise groups and directors’ obligations, plus several othertexts, would together occupy more than 400 pages of text. In the interests of keeping this single-volume work tomanageable size the section that would have contained all the UNCITRAL material is replaced by clear directions onhow to access the organisation’s website, where all the texts are fully available in English and also in the other workinglanguages of the UN. In this way, space has been made for all the most recent documentation generated from othersources, while the overall length of the book is actually some twenty pages shorter.

The opening Commentary (134 pages) provides a masterly survey of the fruits of over 50 different instruments whichcomprise the textual “canon” of cross-border insolvency documentation. It provides a useful “crash course” for anyonecoming freshly to the subject as well as enabling more experienced readers to refresh their knowledge of the currentstate of affairs. The remainder of the book consists of 50 “Annexes” displaying the texts (in English) of the chosenmaterials in their most recent iteration. Included here are the up to date texts of the EU Insolvency Regulation and ofthe recast Insolvency Regulation adopted in 2015 and destined to begin to apply from 26 June 2017 onwards. Otherwelcome additions to this collection are the seminal “Principles of European Insolvency Law” from 2003 and the EUCross-Border Insolvency Court-to-Court Cooperation Principles” (2015), designed to be used in conjunction with thecurrent and future versions of the Insolvency Regulation.

The global movement towards the development of standards and principles to be embraced in common by courts andpractitioners from all quarters of the world has been most recently expressed in the Transnational Insolvency Project(2012) undertaken jointly by the American Law Institute and the International Insolvency Institute. The text of theresulting statement of Global Principles for Cooperation in Cross-Border Insolvency Cases is reproduced in Annex 21.The growing emphasis on enhancing standards of professional training across the world of insolvency practice (anotable aspect of the mission of INSOL International itself) is seen in recent projects to develop internationally agreedprinciples and guidelines for insolvency office holders. One example is the 2014 draft issued by INSOL Europe,reproduced in Annex 44. This document can be studied in conjunction with the earlier statement of Insolvency OfficeHolder Principles issued by the EBRD in 2007 (Annex 31).

In conclusion, the second edition of this valuable collection is to be even more warmly welcomed than the first, and iscommended to all who need to have easy and convenient access to the original source materials bearing on theinternational aspects of insolvency law and practice, now very numerous and published in many diverse forms. To findthem all located within a single set of covers, accompanied by a lucid exposition to guide the reader through thedocumentary maze, is indeed a boon.


American Bankruptcy InstituteAsociación Argentina de Estudios Sobre la Insolvencia

Asociacion Uruguaya de Asesores en Insolvencia y Reestructuraciones EmpresarialesAssociation of Business Recovery Professionals - R3Association of Restructuring and Insolvency Experts

Australian Restructuring, Insolvency and Turnaround AssociationBusiness Recovery and Insolvency Practitioners Association of NigeriaBusiness Recovery and Insolvency Practitioners Association of Sri LankaCanadian Association of Insolvency and Restructuring ProfessionalsCanadian Bar Association (Bankruptcy and Insolvency Section)

China University of Politics and Law, Bankruptcy Law and Restructuring Research CentreCommercial Law League of America (Bankruptcy and Insolvency Section)

Especialistas de Concursos Mercantiles de MexicoFinnish Insolvency Law Association

Ghana Association of Restructuring and Insolvency AdvisorsHong Kong Institute of Certified Public Accountants (Restructuring and Insolvency Faculty)

Hungarian Association of Insolvency PractitionersINSOL EuropeINSOL India

INSOLAD - Vereniging Insolventierecht AdvocatenInsolvency Practitioners Association of MalaysiaInsolvency Practitioners Association of Singapore

Instituto Brasileiro de Estudos de Recuperação de EmpresasInstituto Brasileiro de Gestão e Turnaround

Instituto Iberoamericano de Derecho ConcursalInternational Association of Insurance Receivers

International Women’s Insolvency and Restructuring ConfederationJapanese Federation of Insolvency Professionals

Korean Restructuring and Insolvency Practitioners AssociationLaw Council of Australia (Business Law Section)Malaysian Institute of Certified Public AccountantsNepalese Insolvency Practitioners AssociationNational Association of Federal Equity Receivers

NIVD – Neue Insolvenzverwaltervereinigung Deutschlands e.V.Non-Commercial Partnership Self-Regulated Organisation of Arbitration Managers

“Mercury” (NP SOAM Mercury)Recovery and Insolvency Specialists Association (BVI) Ltd

Recovery and Insolvency Specialists Association (Cayman) Ltd Recovery and Insolvency Specialists Association of Bermuda

REFOR – The Insolvency Practitioners Register of the National Council of SpanishSchools of Economics

Restructuring Insolvency & Turnaround Association of New ZealandRussian Union of Self-Regulated Organizations of Arbitration Managers

Society of Insolvency Practitioners of IndiaSouth African Restructuring and Insolvency Practitioners Association

The Association of the Bar of the City of New YorkTurnaround Management Association (INSOL Special Interest Group)

Member Associations

Conference Diary

Copyright INSOL International – No part of this journal may be reproduced or transmitted in any form or by any means without the priorpermission of INSOL International or any of its members associations. The publishers, editors and authors accept no responsibility for

any loss occasioned to any person acting or refraining from acting as a result of any view expressed herein.Readers should seek advice on all points material to them from someone qualified to practice in the country concerned.

Published by: INSOL International Editors: Ken Coleman and Nicholas Segal. Design and artwork by: Consort Communications Limited

February 201617-19 TMA Distressed Investing Conference Las Vegas, NV TMA www.turnaround.org24-26 IAIR Insolvency Workshop Amelia Island, FL IAIR www.iair.org

March 20161 INSOL International Mexico City One Day Seminar Mexico City INSOL International www.insol.org

April 201622 Joint R3 / INSOL Europe Conference London, UK R3 / INSOL Europe23 INSOL International Delhi One Day Seminar Delhi, India INSOL International www.insol.org

May 201613 INSOL Europe EECC Conference Romania INSOL Europe www.insol-europe.org18-20 R3 Annual Conference Budapest, Hungary R3 www.r3.org19 CAIRP Insolvency and Restructuring Exchange Toronto, ON CAIRP www.cairp.ca

June 20169 INSOL International Channel Islands INSOL International www.insol.org Channel Islands One Day Seminar

July 201613-15 INSOL International Academics’ Colloquium London, UK INSOL International www.insol.org

August 201618-20 CAIRP Annual Conference Montreal, QB CAIRP www.cairp.ca

September 201622-25 INSOL Europe Annual Congress Lisbon, Portugal INSOL Europe www.insol-europe.org

November 201617 INSOL International BVI One Day Seminar BVI INSOL International www.insol.org

March 201719-22 INSOL 2017 Tenth World Sydney, Australia INSOL International www.insol.org International Quadrennial Congress

http://www.turnaround.org

http://www.iair.org



http://www.insol-europe.org

http://www.r3.org

http://www.cairp.ca



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BERMUDA BRITISH VIRGIN ISLANDS CAYMAN ISLANDS DUBAI HONG KONG LONDON MAURITIUS SINGAPORE / conyersdill.com

OPTIMAL BANKRUPTCY, INSOLVENCY, RESTRUCTURING & LITIGATION SERVICE SOLUTIONS

EXTENSIVE CROSS BORDER EXPERIENCE

EXCELLENCE AND INNOVATION

BERMUDA Robin J. Mayor DIRECTOR, HEAD OF INSOLVENCY & RESTRUCTURING [email protected] +1 441 299 4929

BRITISH VIRGIN ISLANDS Mark J. Forte PARTNER, HEAD OF LITIGATION & RESTRUCTURING

[email protected] +1 284 852 1113

CAYMAN ISLANDS Paul Smith PARTNER, HEAD OF LITIGATION & RESTRUCTURING

[email protected] +1 345 814 7777

For Bankruptcy, Insolvency, Restructuring & Litigation advice, please contact:

HONG KONG Nigel K. Meeson QC PARTNER, HEAD OF ASIA DISPUTES

& RESTRUCTURING

[email protected] +852 2842 9553



