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Welcome to issue number 5 of the INSOL International News Update. In Japan, February saw the Government sponsored workout authority, the Industrial Revitalization Corporation of Japan (IRCJ), exiting from its position in Kanebo Ltd., after successfully driving the firm’s reorganization and the introduction of new investors. Kanebo is one of Japan’s oldest corporations and was often cited as a typical example of the country's inability to deal with its ailing corporate sector. With the IRCJ’s assistance, however, the company has been reorganized, stripped of its under performing business units, re-floated and recapitalized – all within a two year period. We explore the challenges involved in the case and the lessons learned with Mr Ryutaro Katayama, Managing Director in charge of Kanebo’s turnaround. Also in this issue, we cover news of the first order under Chapter 15 of the United States Bankruptcy Code, we discover just how short Chapter 11 proceedings can be as a result of judicious pre-packaging of a workout deal. We also look at challenges raised to the Australian Corporations Act in a recent case. We would also like to remind readers about the upcoming INSOL Annual Regional Conference in Scottsdale Arizona, from 21-24 May 2006. The theme of the conference is “Cross-border Insolvency: Co-operation or conflict?”. With increasing globalization, more and more insolvency cases are involving cross-border elements, making cross-border insolvency an issue none of us can afford to ignore. The Scottsdale conference includes a highly interactive program which will address the current "hot topics" relating to crossborder insolvency. With delegates being encouraged to participate and share their experiences, this conference is sure to be a stimulating and thought provoking experience. Intellectual issues aside, Scottsdale is renown for its spectacular weather and with the Grand Canyon, 200 golf courses and 125 galleries and museums nearby, you can’t help but to have an enjoyable visit. So why not come along and share your experience and pick up on the hard won lessons of some of the best practitioners in the business? To view the conference brochure, please click here To register, please contact our Communications Manager, Penny Robertson at pennyr@insol.ision.co.uk or you can register on-line at the INSOL website www.insol.org or directly by clicking here Peter Gothard, Partner, Ferrier Hodgson, Tokyo
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Kanebo Ltd., – A Model Restructuring for Japan Founded in 1887, Kanebo Ltd., is one of Japan’s oldest companies. It employed over 22,000 workers around the world in a diverse business empire spanning operations in cosmetics, textiles, fashion, food and pharmaceuticals. These operations generated turnover of approximately USD5 billion per annum, but, saddled with debts of nearly USD6 billion the company was suffering significant trading losses. With its finances in a precarious state, Kanebo sought the assistance of the Government backed, Industrial Revitalization Corporation of Japan (IRCJ) in March 2004. When the IRCJ completed the company’s rehabilitation and sold the company to Kao Corporation and a group of investment funds in January of this year, the company’s debts had been reduced to around USD1.4billion and its operating losses extinguished. The deal was reported to be the 6th biggest M&A deal in Japan in 2005. The IRCJ’s makeover of Kanebo from a diverse, loss making enterprise, to a leaner, more efficient organization was completed within a remarkably short period of two years. The man responsible for this success was the IRCJ’s Mr. Katayama. I was indeed privileged to be able to interview Mr Katayama and gain an insight into how this extraordinary restructuring was concluded so effectively. For the full interview please click here. Peter Gothard, Partner, Ferrier Hodgson, Tokyo |
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| Case Decisions | |||||||||
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ASIA & PACIFIC RIM Australia Court Okays Fix for Administrators' Remuneration Gidley, in the Matter of Alliance Motor Body Pty Ltd [2006] FCA 102 The Federal Court has upheld the validity of a mechanism that allows administrators of Deeds of Company Arrangement to have their remuneration approved in advance of the administration of the deed. This matter arose from a decision in late 2004 which called into question the ability of a creditors' meeting to "pre-approve" remuneration on the basis of the administrator's scale of fees. The mechanism now endorsed by the Federal Court addresses the concerns raised in the 2004 decision. Notwithstanding this development, Australian insolvency practitioners are still awaiting details of a proposed revamp of corporate insolvency law which will apparently address the issue of their remuneration. For a comment on this decision please click here. EUROPE, AFRICA & MIDDLE EAST Germany BGH., Urt v. 24.05.2005 - IXZR 123/04: 24 May 2005 In this case, the German Supreme Court has given further directions on illiquidity, and on the inability of a debtor to pay its debts. The Court has ruled that:
For more details see Eurofenix, Winter 2005, Page 10. United Kingdom Pirelli Cannot Have It's Cake and Eat It - Says House of Lords [2006] UKHL 4 The Pirelli Group had been claiming that the UK subsidiary was entitled to compensation for having had to pay Advance Corporation Tax (ACT) on dividends it paid to its Dutch parent as this obligation breached its right under EU law. This was despite the fact that the Dutch parent had received a repayment of 50% of the tax credit which attached to that dividend under the UK/Netherlands tax treaty. Her Majesty's Revenue & Customs claimed that it could offset the repayment of the tax credit under the double tax treaty against any compensation due to the subsidiary. The taxpayers claim that the parent's right to receive the tax credit was legally separate from any obligation of the subsidiary to pay ACT and therefore no set-off was permitted. For a comment on this decision please click here. European Insolvency Regulation Database - INSOL Europe This is a case register designed to provide and facilitate the exchange of knowledge between insolvency professionals across the world. If you would like to send in relevant cases or commentaries to be included in this database or to subscribe to its free e-mail alert service, please click here. |
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ASIA & PACIFIC RIM Australia Australian Corporate Insolvency Statute Under Constitutional Challenge ... Again The legal validity of the main business and corporate insolvency statute in Australia is once again under attack. This follows a period of relative quiet in which it was thought that the enactment of the Corporations Act 2001 had largely addressed constitutional concerns about the Australian Company law regime. Now the High Court is hearing a challenge to the jurisdiction of State Courts to hear Corporations Act matters which has been highlighted in an issue raised in Forge & Ors v ASIC & Ors. It will be some time before the High Court hands down a ruling on the issues that have been argued in court and it is impossible to predict what the outcome will be. |
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AMERICAS United States Second Circuit Clarifies the Contours of Derivative Standing in Bankruptcy In Re Smart World Technologies, LLC the Second Circuit reversed the decisions of the bankruptcy and district courts and held that in certain circumstances, creditors may seek approval of settlement of a claim belonging to a debtor over the debtor's objection. This ruling may be of particular interest to creditors committees and others who may seek in bankruptcy proceeding, "derivative standing" to take action on behalf of a debtor. (The concept of derivative standing allows creditors to bring causes of action against third parties on behalf of the debtor when the debtor's management or trustee refuse to bring proceedings. Many US bankruptcy and circuit courts recognise this concept.) This decision of the Court of Appeal reinforces the debtor's role as the sole legal representative of the estate, and makes it clear that a bankruptcy court may not make any grant of derivative standing lightly. The decision also recognises however that there are instances in which derivative standing may be granted to third parties and this would mean that aggressive creditors wishing to influence the direction of a bankruptcy case now has another weapon with which to do so. For the full article please see White & Case Insolvency Notes, January 2006, Page 7 |
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AMERICAS United States (i) First Order Under the New Chapter 15 of the US Bankruptcy Code On 7th December 2005, in the case of In Re La Mutuelle du Mans IARD United Kingdom Branch MMA Account, US bankruptcy court judge Burton R Lifland made an order to aid a non-US proceeding involving a foreign business debtor. Judge Lifland ordered that the foreign proceeding is granted recognition as a foreign main proceeding and that the scheme of arrangement sanctioned by the UK High Court in foreign proceedings shall be given full force and effect and be binding on and enforceable against all persons and entities in the USA. Many other key factors were also considered. For more details of the order please click here. (ii) Blue Bird Body Company: Fastest Ever Chapter 11 Reorganisation Blue Bird, manufacturers of the iconic yellow school buses in the US filed a pre-packaged chapter 11 plan in the bankruptcy court in Nevada on Thursday 26, 2006. On Friday January 27th, 2006, the plan was confirmed, over the objection of one of the impaired creditors. The company's stay in bankruptcy lasted less than two days, which is the shortest span between the filing of chapter 11 petitions and confirmation of a reorganisation plan of any chapter 11 case in the US bankruptcy history. |
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EUROPE, AFRICA & MIDDLE EAST Germany Insolvency and Restructuring in Germany - Yearbook 2006 This yearbook has two parts. Part one covers several interesting articles on German insolvency laws and practice and insolvency statistics, and part two contains insolvency statutes, the EC Regulation on insolvency and a supplement to the Regulation.
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If you would like to introduce a new member to INSOL International please contact our Communications Manager, Penny Robertson at pennyr@insol.ision.co.uk |
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This issue was kindly sponsored by:
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