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2021-03-doc1 Thinking corporate restructuring

In her new monograph, Sarah Paterson, associate professor of law at the London School of Economics, makes the argument to abandon the search for a fixed or universal conceptual framework for analysing corporate reorganization law. In the book Corporate Reorganization Law and Forces of Change, Paterson denies that it is possible to use such a universal conceptual framework in analysing the many different types of corporate reorganization case for large corporations which have emerged in the twenty-first century. These large corporations concern companies with liabilities of at least 100 million USD. In the US, in 2014, the American Bankruptcy Institute issued a large report with recommendations for a comprehensive chapter 11 reform: drivers for change were the use of secured credit, the growth of distressed-debt markets, the growing use of ‘fire sales’ instead of the use of the traditional Chapter 11 tool of the rehabilitation of a company. However, Paterson argues, that the universal concept of Chapter 11, used in the US for over 40 years and followed by mane other countries, is unfit. Almost every aspect in the financial and non-financial landscape has changed over the last 40 years and or so and any change in US bankruptcy law should be more fundamental.

That’s quite a claim, for which she identify six ‘forces of change’ in the fields proximate to corporate reorganization. These forces have changed roles and functions of participants in the process (among which leveraged capital structures, debt trading, secured credit, change in debtor control rights, the end of the steady lifetime employment for managers, rise of private equity) and have mobilized and adapted corporate reorganization law in new and diverse ways. One must be fairly well introduced to academic theories to understand the get a grip on the debate, to get accustomed to what is meant with the (US) debate ‘economic versus progressive’. The same goes for the line of argumentation by Paterson expressing that ‘logics’, ‘practices’ and ‘identities’ in financial and non-financial corporate fields have changed the organizational and institutional environment in which corporate reorganization law functions. Although I am used to the necessary academic terminology, the used in the book is difficult to fathom. These words are used in nearly every chapter without their meaning clearly explained. A comparative US/UK approach is adopted in analysing both the process of institutional change and the implications for law. The book mainly competes with scholars who continue to propagate the usefulness of existing (Chapter 11) concepts. The book will then mainly set a token of importance in the Anglo-Saxon debate about the most desirable corporate reorganization. The book therefore seems to me particularly suitable for scholars who are initiated in this debate and who know well the US and UK systems of corporate reorganization.

To my regret, what it does not do, is discuss the themes that play a role in the implementation on the European continent of the European restructuring directive, certainly steered by traditional Chapter 11 thinking. What it does do, however, is to widen the view of those who are Chapter 11 traditionalists and criticizes the methodology the World bank Doing Business rankings is using, and its policy objects (strongly influenced by Chapter 11 thinking). Paterson indeed provides another light to those who advocate this traditional policy goals and warns for the risk of policy missteps. The book argues that corporate reorganisation law cannot be evaluated using a theoretical model in isolation from the wider institutional context in which corporate reorganisation law is mobilised and adapted by the participants to the process. More attention for the changes in the wider, shifting landscape in which corporate reorganization is embedded is necessary, and Paterson also touches upon not yet visible future changes, such as environmental concerns, the shareholder value debate, reputation concerns. The wider perspective is perhaps a large step for common law jurisdictions. For civil law jurisdictions insolvency law tools, including the restructuring concept suggested by the EU may be placed stronger and function better in these country’s general system of private and corporate law.

In any event, in both the US and in England, and indirectly for the EU, a call to all interested in looking for the ingredients for an efficient conceptual framework for analysing the whole of corporate reorganization law.

Sarah Paterson, Corporate Reorganization Law and Forces of Change, Oxford University Press 2020. ISBN 978-0-19-886036-5.

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Note: this book I received free of charge from the publisher with the request to announce it or to review it on my blog at