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2020-04-doc2 Asian Principles of Business Restructuring: a promising first step

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It is timely and most appropriate to report about the Asian Principles of Business Restructuring Project undertaken by the Asian Business Law Institute (ABLI) and the International Insolvency Institute (III). I have the honor to serve as a member of the Advisory Committee providing supervision and guidance to the Project, see for its start https://bobwessels.nl/blog/2017-09-doc10-launch-of-asian-principles-of-restructuring-project/.

The Project covers 16 jurisdictions, namely all ten Association of Southeast Asian Nations (ASEAN) member states (Brunei, Cambodia, Indonesia, Lao, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) and six of ASEAN’s major trading partners, namely Australia, China, Hong Kong SAR, India, Japan and South Korea. The project is organised in two phases, which I think can serve as a template for similar exercises. Phase 1 involves a mapping exercise of the business restructuring regimes, both in-court and out-of-court, in the jurisdictions mentioned. Phase 2 involves a review of these jurisdictional reports to identify common themes and approaches to in-court and out-of-court reorganisation in the countries mentioned. The conclusions of the review will in part inform the recommendations that will be made for a set of principles, to be described as the Asian Principles of Business Restructuring of which it is hoped that they will serve as the reference for all stakeholders in Asian restructurings, including judges, legislators, policy-makers and practitioners.

The mapping exercise is based on a detailed questionnaire that acted as a guidance for the jurisdictional reporters when preparing their reports. The questionnaire, with over 200 questions, covers several topics that also were included in a rather similar exercise in Europe, leading to the report: Bob Wessels and Stephan Madaus, Instrument of the European Law Institute on Rescue of Business in Insolvency Law, 2017, available at: https://ssrn.com/abstract=3032309. In the ABLI-III project, Phase 1 was finalised with the publication, early April 2020 of a compendium of jurisdictional reports titled Corporate Restructuring and Insolvency in Asia 2020. Phase 2 will be kicked off soon and reflects the real effort. The Asian Principles will be jointly issued by ABLI and III.

Finalising the first act in this theatre play, already allows praise and flowers. The over 800 pages compendium Corporate Restructuring and Insolvency in Asia 2020 brings, as far as I know, for the first time all ten ASEAN member states together in one publication, most strikingly also ‘unknown’ territories such as Brunei, Lao and Myanmar are discussed in detail. From the wide variety of issues for both in-court and out-of-court restructuring procedures, I mention: the role of insolvency office-holders, the effect of stays and moratoria, rescue financing, creditor ranking and priority, treatment of foreign creditors, employment issues, avoidance/clawback and safe harbour, group insolvency, micro-, small and medium-sized enterprises and international and cross-border insolvency law. Reading the materials, one will notice that the reports are full of sources and footnotes, with appendices of legislation. The Compendium is available at https://ebooks.abli.asia/insolvency/. The Compendium therefore may also serve scholarly and academic research.

However, one should not be distracted from the original plan of providing principles for all stakeholders in Asian restructurings. The economy in ASEAN jurisdictions is growly rapidly but their restructuring and insolvency regimes are not well known, and in some cases, not known at all, to the outside world. This generally is not supportive for international business of foreign investors. These jurisdictions may also consider improvements in an aligned fashion, to allow better economically connected business communities. A challenge will be to understand and access the impact of COVID-19 effects to the market conditions on which the reports in de compendium are based. Will economies go back to ‘normal’, and if so, in 3, 6 or 16 months? This is, however, a question, we face all over the world.