Changes in Singapore company law Relevant to LW (SGP) An outline of the recent review of Singapore company law and regulatory framework. The UK government had previously said that the … 127 JL Westbrook, ‘The Control of Wealth in Bankruptcy’ (2004) 82 Texas Law Review 795, 805. This chapter is divided into six sections. In other words, where does the additional value come from? Here, the firm may change the equity pattern, cross-holding pattern, debt-servicing schedule and the equity holdings. 66 ‘I have not offered a single-rationale policy that compels solutions in a particular case. 63 LoPucki, ‘A Team Production Theory of Bankruptcy Reorganisation’, 778. A pre-pack administration therefore refers to the situation where arrangements for the sale of an insolvent business have been negotiated with prospective purchasers and agreed by the major creditors123 prior to the commencement of the administration procedure, with the sale being completed almost immediately after the appointment of an administrator. At the initial stage of the process, the participating parties should agree among themselves to an informal ‘standstill’, which typically last for several months and is sufficient to prevent all relevant creditors from taking any steps to enforce their claims against the debtor company. 30 DR Korobkin, ‘Contractarianism and the Normative Foundations of Bankruptcy Law’ (1993) 71 Texas Law Review 541, 555. 55 LoPucki, ‘A Team Production Theory of Bankruptcy Reorganisation’, 749. Professor Belcher defined the term ‘corporate rescue’ as ‘a major intervention necessary to avert eventual failure of the company’.1 Such a broad definition encompasses any drastic remedial action to a company at a time of corporate crisis, including both the informal and formal strategic rescue responses.2 In contrast, a narrow definition of the term uses it to cover only the operation of legal proceedings, which offer facilitating mechanisms for rescuing financially distressed companies. 57 LoPucki, ‘A Team Production Theory of Bankruptcy Reorganisation’, 743. The first is a moratorium effect. Cassidy Partner's Corporate Rescue is undergoing a site refresh. Printer friendly . See Finch, Corporate Insolvency Law: Perspectives and Principles, 29 and Armour, ‘The Law and Economics of Corporate Insolvency: A Review’. Since the inception of the Act, numerous judgments dealing with the business rescue provisions, as well as related matters, have been handed down by our high courts in the various provinces. One such judgment that will be carefully considere… As mentioned earlier, the liquidation procedure is oriented to the winding-up of the company by ceasing its operations, realising its assets and paying off its debts and liabilities.5 In the process of realising its assets, a result that amounts to a rescue may be achieved where the company’s assets are sold in the form of a complete takeover or a bulk sale of the assets, which involves the sale of the entire business, including goodwill and other intangibles.6 Nevertheless, despite the rescue outcomes, the liquidation procedure is not recognised as part of corporate rescue proceedings in the sense used here since its goal is different. 35 E Warren, ‘Bankruptcy Policy Making in an Imperfect World’ (1993) 92 Michigan Law Review 336, 356. This allows them to restructure and reorganise their operations. Lee Shih and Huey Lynn write about the Singapore decision on the appointment of interim judicial managers. American Chapter 11, commonly referred to as ‘reorganisation’, aims at promoting the economically viable company to recovery and maintaining the business as a going concern.113 By granting an automatic stay to prevent creditors from collecting their claims or enforcing their liens, incumbent management is allowed to retain control of the company and is granted the exclusive right to propose a plan of reorganisation within 120 days after the Chapter 11 filing date.114, Both countries take a view that corporate rescues can be justified by the fact that assets used by a going concern company are more valuable than if the company was liquidated piecemeal, but the legal rescue procedures in the two jurisdictions are very different in terms of orientation and institutional arrangements. Rejecting the view that bankruptcy law is merely a response to the problem of collecting debt, Professor Korobkin presents a value-based account which views bankruptcy law as ‘a response to the many aspects of financial distress – moral, political, personal, social, and economic – and, in particular, to the grievances of those who are affected by financial distress’.32 Because the participants’ varied grievances typically reflect conflicting and fundamentally incommensurable values, bankruptcy law has a distinct function to provide a forum for an ongoing debate in which these diverse values can be expressed and sometimes recognised.33 Moreover, the idea that a troubled company constitutes a mere pool of assets is also challenged. The editorial board is made up of practising and academic lawyers and is supported by a panel of contributing law, accountancy firms and organisations providing content.. This can greatly reduce the time spent in bankruptcy, because the principal remaining tasks are the approval of the disclosure statement and confirmation of the plan by the court.120. In particular, how should the competing interests and various goals that underlie the insolvency system (e.g. With the promulgation of new legislation, it is interesting to follow the jurisprudence that develops with it. The focus of this week’s article is the effect of business rescue on employees during business rescue proceedings.. The premise of the going-concern value in the traditional sense has also been questioned by the argument that if the intangible assets are the only source of the going-concern surplus, most failed companies may be said to have no going-concern surplus, as their failure is usually due to their lack of valuable intangible assets, having neither a sound business strategy nor a good reputation.10. ️ Print as many copies as you need. The term ‘corporate rescue’ is understood in very different ways by policy-makers, judges and scholars. The complexity of the company’s capital structure and the heterogeneity of the financial claims could generate severe holdout problems. As a result, critical questions, such as how to judge if trade-offs between different goals are desirable or not, remain unresolved. The contractarian approach has been subjected to extensive criticism. ..... 150 The “economic beneﬁts model” for trusts – fool’s gold? The sheer involvement of a greater number and diversity of players is likely to mitigate against the rapid, informed and cheap negotiation of rescues by a stable group of parties. What does … MS Kirschner et al., ‘Prepackaged Bankruptcy Plans: The Deleveraging Tool of the ’90s in the Wake of Old and Tax Concerns’ (1991) 21 Seton Hall Law Review 643, at note 7. They are accompanied by the uncertainty of the valuation on the financially distressed company.126. debt releases: corporate rescue exemption: material risk Material risk of the company being unable to pay its debts The terms ‘reasonable to assume’ and ‘material risk’ of being unable to pay debts, taken together mean that there must be a realistic likelihood of the company going into insolvency if remedial action is not taken. CSR abbreviation. In a nutshell, the team production theory attempts to offer a justification of corporate reorganisation by adopting the new contractarian theory of the public corporation introduced by Professors Blair and Stout in 1999 to the bankruptcy reorganisation regime. It is suggested that the merits of particular trade-offs may only be argued for in particular contexts and cannot be preordained according to set rules.85 Mokal has argued that Finch’s understanding of the ‘benchmark’ concepts lacks consistency and that she is unable to provide a satisfactory account of their relationship inter se. 49 See McCormack, Corporate Rescue Law: An Anglo-American Perspective, 29–30 referring to CW Mooney ‘A Normative Theory of Bankruptcy Law’, whose comments were framed with particular reference to Korobkin’s theory. 92 Finch, Corporate Insolvency Law: Perspectives and Principles, 209. corporate governance and, to the extent that the data permits, the first analysis of the relationship between corporate governance quality and the performance of financial institutions. See further V Finch, ‘The Dynamics of Insolvency Law: Three Models of Reform’, (2009) 3 Law and Financial Markets Review, 438. This has provided companies in financial distress with an alternative to insolvency. There are three basic flight conditions for a helicopter: hover, forward flight and the transition between the two. A formal procedure, such as Chapter 11 of the US Bankruptcy Code or the UK Administration, normally involve a moratorium on the enforcement of a wide range of creditors’ rights and so creates a more sustainable space within which a rescue can be organised.111 Insolvency legislation also provides various mechanisms whereby compromises and arrangements can be made under the supervision of the court or a formal legal structure, one objective of which is to ensure that minority dissenters are eventually bound.112. It becomes even more difficult for banks to coordinate given the increasing complexity of financial structures where hedge funds and private equity groups grew explosively in power and influence in recent years. First, corporate rescue can be premised on (contractually agreed) informal mechanisms as well as on formal collective legal proceedings. 46 See Korobkin, ‘Contractarianism and the Normative Foundations of Bankruptcy Law’, 578. The modern debate began in the US during the 1980s over the question whether insolvency law does – or should – seek only to maximise the returns to pay creditors of an insolvent company, or whether other goals do or should matter; such as preserving jobs, rehabilitating troubled companies and protecting the interests of local communities.16 Among the competing views on the goals or values that insolvency law should reflect, on one side, there is a ‘market and assets’ camp focusing on the assets of the debtor and value maximisation for creditors. However, it is empirically difficult to distinguish between financial and economic distress. 118 Such as the UK administration procedure or the US Chapter 11 reorganisation. If approved, the appointed practitioner will oversee and supervise the companies affairs. There are set laws, regulations, and requirements set out by the legal system. how corporate rescue can be funded in the UK. These differences often stem from the divergent standpoints regarding the approaches and purposes of rescue actions in response to companies’ financial troubles. This is a wide protection afforded to the distressed company to give it some breathing room to stay legal proceedings against the company. Corporate Restructuring Definition: The Corporate Restructuring is the process of making changes in the composition of a firm’s one or more business portfolios in order to have a more profitable enterprise.Simply, reorganizing the structure of the organization to fetch more profits from its operations or is best suited to the present situation. Korobkin pointed out that ‘the problem of collecting debt is a complex one, implicating moral, political, personal, social, as well as economic values’. 50 McCormack, Corporate Rescue Law: An Anglo-American Perspective, 30. Such committees are often advised and assisted by professional advisers for better commercial decision-making. 77 IF Fletcher, ‘UK Corporate Rescue: Recent Developments – Changes to Administrative Receivership, Administration, and Company Voluntary Arrangements – the Insolvency Act 2000, the White Paper 2001, and the Enterprise Act 2002’ (2004) 5 European Business Organization Law Review 119, 122. The practitioner oversees the company in financial distress. Businesses in financial distress have an option to turn to outside of liquidation. See more. 78 Cork and Committee, Insolvency Law and Practice: Report of the Review Committee, 56. Underlining such differences is the distinction between ‘company rescue’ and ‘business rescue’. Under English administration procedure, the administrator’s proposals are passed when support is obtained from a majority in value of those present and voting creditors, either in person or by proxy. The differences in their institutional arrangements governing insolvency and corporate rescue reflect the differences in their culture, economic environment and political constraints. Why you should buy Corporate Rescue and Insolvency. Bankruptcy proceedings should not be the place to implement a policy that society does not enforce outside of bankruptcy and that is unrelated to the preservation of assets for the firm’s investor group.27 It follows from the above arguments under this theory that the protection of the non-creditor interests of other victims of corporate misfortune, such as employees, managers, suppliers and the community at large ought not to be a concern of insolvency law.28, The creditor wealth maximisation argument has been highly influential and has been put into legislative effect in many jurisdictions.29 However, this normative theory has been subject to extensive criticism by a number of schools of thought. Business rescue in South Africa saw its introduction as a part of Chapter 6 of the New Companies Act. This continues until the rescue process concludes, and no longer affects the company.
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