Research Handbook on Corporate Bankruptcy Law, published in 2020, brings together leading experts on the law and economics of corporate bankruptcy. The handbook is edited by Barry Adler (New York Law School), the contributors are all American and after a foreword and an introduction, 15 chapters follow.
The scope of bankruptcy
The Foreword is from éminance grise, Douglas G. Baird, who explains that the book in fact is a celebration of the work of Thomas Jackson, whose ideas go back to the end of the 70s of the last century. Baird tries to explain the effects of his work and provides some reassessment of the well-known and also in European academic circles glamourised creditors’ bargain theory. In the Introduction, editor Adler reflects the resorts of the theory: creditors grip on what American call large-firm corporate bankruptcy has grown enormously, as has the use of secured credit. This rattles the door of Jackson’s hypothetical creditors bargain with an actual and real one. Traditional reorganisation has been gradually replaced by a process of selling the business and thereby viewing involved interests rather differently. And in half a century, globalisation and changes in the financial market (derivatives) have changed Jackson’s paradigm. Jackson’s answer in the first chapter (‘Bankruptcy’s logic and limits in the 21st century: Some thoughts on chapter 11’s evolution and future’) tempers sentiments and results in his view that a complete overhaul of the 1978 Bankruptcy Act is not necessary as some developments have been already included or are applied, while the remaining wishes can be accomplished within the existing structure of Chapter 11. In earlier publications I expressed doubts. One wonders whether it is possible to suck the more recent developments into the existing bankruptcy theory, so much focused on the common pool problem. Is it logical to include recent phenomena, which are rather based on general principles of contract and corporate law, be it determined by its own policy goals: not collective enforcement of existing claims converted into individual dividends, but a negotiated and (forced) conclusion of contracts, with an eye on the debtor and the creditors deal about restructured positions and future earnings. In all, recommended reading, also for European scholars.
Corporate bankruptcy analysed
With the well-known title ‘The end of bankruptcy revisited’ Robert K. Rasmussen expresses renewed views on the shift from the original debtor-driven reorganisation process to a creditor driven auction block. In ‘Bankruptcy sales’ Melissa B. Jacoby and Edward J. Janger condemn this auction model, ripe for reform. The titles of the next chapters (4. The new synthesis of bank regulation and bankruptcy in the Dodd-Frank era, by David Skeel; 5. Derivatives and repos in bankruptcy from Mark J. Roe, and 6. Distress-triggered liabilities and the agency costs of debt, Richard Squire) are self-explanatory.
The following two chapters contain – words of Adler – the fundamentals of durational bankruptcy issues (7. On the mandatory stay of secured creditors in bankruptcy from Kenneth Ayotte, and 8. Debtor-in-possession financing in bankruptcy by George G. Triantis). These are durable in another aspect too as the stay and the DIP are concepts in the EU Preventive Restructuring Directive, and therefore of interest to European practice as well. The two following chapters are equally important, touching upon the Absolute Priority Rights (APR) debate (9. Beyond options by Anthony J. Casey and Edward R. Morrison, and 10. The treatment of secured credit in bankruptcy: A unified model by Michell J. White), which indirectly comes back in the piece on fraudulent conveyance laws (11. Making fraudulent transfer law more predictable by Michael Simkovic). As a final chapter to mention here, I refer to John Pottow’s contribution ‘Cross-border corporate insolvency in the era of soft(ish) law’, describing the incremental, UNCITRAL led steps towards universalism.
In all, readable and guiding contributions concerning fundamental issues of large group corporate bankruptcies. In Europe, the book will prove equally valuable to lawmakers and scholars with an affection for law and economics policy analysis of the theme.
Research Handbook on Corporate Bankruptcy Law, edited by Barry E. Adler. Edward Elgar Publishing 2020. ISBN: 978 1 78100 787 7.
Note: I received the book free of charge from the publisher with the request to announce it or to review it on my blog at www.bobwessels.nl.