After a period of 3 years’ work, the American Bankruptcy Commission (ABI) Commission to Study the Reform of Chapter 11 released its final report on Monday 8 December. The report, over 400 pages long, contains over 241 recommendations for modernizing the U.S. Bankruptcy Code for chapter 11 business reorganizations: ‘Chapter 11 works to rehabilitate companies, preserve jobs, and provide value to creditors only if distressed companies and their stakeholders actually use the chapter 11 process to facilitate an in-court or out-of-court resolution of the company’s financial distress.' Chapter 11 therefore needs to offer tools to resolve a debtor’s financial distress in a cost-effective and efficient manner. Funded by ABI and the Anthony H.N. Schnelling Endowment Fund, the Commission’s final report incorporates the recommendations of more than 130 leading experts, providing (with over 1200 footnotes) one of the most comprehensive studies of its kind in more than a decade, giving struggling companies a better shot at survival. In the report it is recommended to, among other things (I am following the Introduction, at 6): (i) Reduce barriers to entry to a chapter 11 case by providing debtors more flexibility in arranging debtor in possession financing, clarifying lenders’ rights in the chapter 11 case, disclosing additional information about the debtor to stakeholders, and providing a true breathing spell at the beginning of the case during which the debtor and its stakeholders can assess the situation and the restructuring alternatives; (ii) Facilitate more timely and efficient diligence, investigation, and resolution of disputed matters through an ‘estate neutral’; this is an individual that may be appointed depending on the particular needs of the debtor or its stakeholders to assist with certain aspects of the chapter 11 case, as specified in the appointment order; (iii) Enhance the debtor’s restructuring options by eliminating the need for an accepting impaired class of claims to cram down a chapter 11 plan and by formalizing a process to permit the sale of all or substantially all of the debtor’s assets outside the plan process, while strengthening the protection of creditors’ rights in such situations; (iv) Incorporate checks and balances on the rights and remedies of the debtor and of creditors, including through valuation concepts that potentially enhance a debtor’s liquidity during the case, permit secured creditors to realize the reorganization value of their collateral at the end of the case, and provide value allocation to junior creditors when supported by the reorganization value; and (v) Create an alternative restructuring scheme for small and medium-sized enterprises that would enable such enterprises to utilize chapter 11 and would enable the court to more efficiently oversee the enterprise through a bankruptcy process that incentivizes all parties, including enterprise founders and other equity security holders, to work collectively toward a successful restructuring. For this reason the Report proposes a set of principles for Small and Medium-Sized Enterprises. Generally, the ABI’s Commission to Study the Reform of Chapter 11 describes how federal lawmakers could restore protections that have eroded since the last major overhaul of corporate reorganization law in 1978. The proposed changes should make chapter 11 more efficient, cost effective and provide more predictability. It will cheaper and simpler for small businesses, which would have access to a new restructuring advisor. In addition they would no longer have to pay for an expensive committee of creditors in most cases.The Report will most probably will be the start of a legislative process which will last several years. However, any long walk starts with a first step. Ch11CommissionReport
As announced last week (see this blog at 2014-12-doc10), on Thursday 4 December 2014 the Council of Justice Ministers adopted a political agreement on the renewed text of the Insolvency Regulation which has been agreed with the European Parliament. This final text is attached. It has the form of a ‘recast’ with changes comparing to the existing Regulation highlighted in bold. It is directly clear that the new Regulation is nearly twice the size of Regulation 1346/2000, now with 83 recitals (coming from 33), and 91 articles (coming from 47), including around 20 articles relating to group insolvencies. It has been reported that the schedule for formal adoption of the Regulation is as follows. Translations in all the Member States’ languages will be made in the next couple of months. The Council will then formally adopt this text (probably in mid-March) as its ‘first reading position’. This text will in turn be adopted by the European Parliament (both at Committee and Plenary level). The envisaged timing for this is April/May 2015. The Regulation will then be published in the Official Journal and enter into force 20 days afterwards. It will enter into application two years from its entry into force with the exception of the provisions on the system of interconnected insolvency registers which will enter into application four years from the entry into force. So, nearly two years after the European Commission presented its 12-12-2012 proposals, a new chapter in European insolvency law will enfold around 4,5 years later: around May 2017. EIR new December 2014 st15414-ad01 en14
I have been chairing a 20+ members international working group providing 'foreign' input the the American Bankruptcy Institute's Commission to Study the Reform of Chapter 11. See this blog, 2014-03-doc12. The Final Report of the Commission is ready. Today, Saturday, December 6, during a session at ABI's Winter Leadership Conference in Palm Springs, California, the report is discussed. The session can be viewed via live webstream by going to http://commission.abi.org at 2 p.m. ET / 7 p.m. (London) / 8 p.m. (CET). The report will be availabl early next week. I will post it on my blog.
A Decision of the Joint Board of Appeal of the three ESAs has been published in the case IPE sprl v ESMA. The Joint Board of Appeal decides on the inadmissibility of an appeal brought by Investor Protection Europe (IPE) sprl, a company based in Brussels, against a decision of the European Securities and Markets Authority (ESMA) of 10 June 2014 not to initiate an investigation under Article 17 of the ESMA Regulation regarding an alleged breach of Union law by the Commission de Surveillance du Secteur Financier of Luxembourg. The Board of Appeal unanimously decided that the appeal was inadmissible, and in the light of that decision, did not consider the substance of IPE’s complaint. The decision is attached, and can be accessed via the websites of EBA, EIOPA or ESMA. BoA 2014 05 (Decision IPE sprl vs ESMA)
In my last blog (2014-11-doc2) I could inform about a partly approved text of the EU Insolvency Regulation (EIR), especially re the new Recitals and the Annexes. Presently it is understood that the tekst of the revised EIR will be finalised and published this week, around 5 December 2014 (so in Holland it can be seen as a gift of 'Sinterklaas'). This text has to be translated in 20 odd languages, as all tekst are equally authentic. This is foreseen to be ready in March 2015 and will be notified at that moment. Then the text will be officially published and the new EIR will come into force 28 days after this notification. Given a two year transitional period (besides 3 exclusions), the new EIR will not enter into force before March 2017.