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Editor's Note Continuing the process of legal reform in Asia, China has recently released new national bankruptcy legislation. While the new rules do not come into effect until June 2007, they are a very welcome development for creditors and financiers operating in China and represent an important step towards a more reliable, transparent and efficient financial system in one of the world’s largest and fastest growing economies. The new rules apply to all state owned enterprises and wholly owned foreign enterprises. They prescribe a new system for winding-up and a procedure to restructure a business and compromise debts. Individuals, branch offices and foreign companies are not covered by the new legislation. The key to the success of the new bankruptcy regime will, of course, rest with its effective and uniform implementation. With the long lead-time available, it is hoped that sufficient resources will be directed into the training and development of government officials and the judiciary to ensure that the new law represents a meaningful improvement over the current situation. If effectively implemented, the effect of the new legislation could be far reaching. Apart from the obvious assistance in reducing non-performing loans and providing creditors with a clearer path to recovery of amounts owed to them, the new laws should encourage greater foreign investment and may lead to a more active and efficient secondary debt market within the country. Given the continued rapid growth of the Chinese economy, the flow on effects of a workable insolvency regime in China would be widely felt and very much welcomed throughout the Asian region and around the world. Peter Gothard |
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Beijing Looks to Turn Red into Black After a decade of development, the PRC will implement its new national bankruptcy regime on June 1, 2007 – marking a significant step in its journey towards becoming a mature economy. This will result in a significant improvement in creditors’ rights, leading to a greater number of successful administrations within the PRC. The development of bankruptcy laws has been a relatively recent phenomenon for China, having first been introduced during the Qing Dynasty in 1906. However, these laws have grown slowly, and have not kept up with the world’s fourth largest economy. This article discusses some of the key provisions of the new legislation, and considers issues that could arise in enforcement, the standpoint of certain stakeholders under the restructuring regime, and possible implementation issues. For more details please click here. Marcus Ayres & Vincent Fok |
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| Case Decisions | ||||||
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AMERICAS CCAA Claims Resolution Procedures Enforceable in the U.S.A. Under Chapter 15 of The Bankruptcy Code In re Ephedra Products Liability Litigation (In re Muscletech Research and Development, Inc.), (No. 04 MD 1598) (S.D.N.Y. Aug. 11, 2006) Muscletech Research and Development, Inc a Canadian based company had over thirty civil actions filed against it for personal injury and wrongful deaths in the USA. Muscletech commenced insolvency proceedings in the Ontario Superior Court pursuant to Canada’s Companies Creditors’ Arrangement Act. The Court appointed Monitor under the CCAA in turn commenced proceedings in the USA under Chapter 15 of the Bankruptcy Code and filed for an order to have the Canadian proceedings recognised as the “main proceedings” which was granted. The Canadian courts thereafter approved a “Claims Resolution Procedure” designed to deal with all the claims including the personal injury claims filed in the USA. The Canadian Monitor filed a motion in the USA, to have this order recognised within the USA but four claimants filed papers opposing the recognition of this procedure in the USA. The U.S. Court found that neither section 1506 of the U.S. Bankruptcy Code (which provides a public policy exception to relief under Chapter 15) nor any other law prevents a U.S. Court from giving recognition and enforcement to a foreign insolvency procedure for litigating claims. The U.S. Court noted that the U.S. Congress instructed the courts to narrowly interpret the word “manifestly” under section 1506 when weighing public policy concerns, and that a foreign judgment should generally be accorded comity if its proceedings are fair and impartial. Accordingly, the US Court granted the Monitor’s motion and gave effect to the procedures in the USA. For a note on this case please click here. For the order of the court please click here. EUROPE, AFRICA & MIDDLE EAST Cross-border Case Law Developments in England – Legal Update Although England has long subscribed to the principle of universality in cross-border insolvency, the path has been an uncertain one. This update focuses on a series of case decisions based on the recent legislative developments and aims to identify their implications in Europe and beyond. It also looks at the legislative and case law effects at Common law. The final part deals with an interesting analysis and questions if the battle has been won? – “Not yet” is possibly the answer. See Legal Update by Nigel Barnett, Recovery, Autumn 2006, P. 9 |
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| Legislation | ||||||
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ASIA & PACIFIC RIM New Bankruptcy Law to Come into Force in June 2007The Law of the People’s Republic of China on Enterprise Bankruptcy, which was adopted at the 23rd meeting of the Standing Committee of the 10th National People’s Congress of the People’s Republic of China on August 27, 2006, shall come into force as of June 1, 2007. For an English translation by The Bankruptcy Law and Restructuring Research Centre of China University of Politics and Law, please click here. |
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| Articles | ||||||
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AMERICAS Eye on the Americas: Cross-border Developments and Receiver Liability There have been 28 cases to date under Chapter 15 of the U.S. Bankruptcy Code, which came into effect in October 2005. Chapter 15 adopts the UNCITRAL Model Law on Cross-border insolvencies almost in its entirety, and deals with foreign proceedings seeking recognition under the U.S. Bankruptcy Code; the granting of authority to act in a foreign country; and the co-ordination of U.S. and foreign proceedings. The cases to date come from Canada, England, Korea, Bermuda, Germany, Japan, Netherlands, Singapore, France, Russia, and the Cayman Islands. This article looks at some important cases filed under Chapter 15 and in particular discusses the Supreme Court of Canada’s recent judgment in GMAC Commercial Credit Corporation – Canada v. T.C.T. Logistics Inc. (2006 SCC 35). For the full article by Janis Sarra, INSOL Scholar, please click here. EUROPE, AFRICA & MIDDLE EAST France: Preventive Measures in a Cross-border Context This article explains where France stands in respect of the international insolvency developments. In particular it discusses the application of the EC Regulation on Insolvency (No. 1346, 2000) in France, and the extra-territorial reach of French insolvency laws. It also discusses the new preventive measures available under the French domestic laws in a cross-border context and covers (i) The mandat ad hoc procedure; (ii) The conciliation procedure; (iii) The procédure de sauvegarde (protection procedure) and (iv) judicial receivership (redressement judiciaire) procedure. Pre-Appointment Remuneration and Expenses – An Update Under the relevant provisions of the UK Insolvency Rules 1986, it would appear that any work carried out by an Insolvency Practitioner pre-appointment, cannot be recovered subsequently by the officeholder as remuneration. If such an interpretation is correct, any fees outstanding at the date of appointment would merely remain unsecured, thereby creating a distinct possibility that the IP will not receive any fees for his pre-appointment work. Over a period of time, there have however been a number of court decisions in the UK which have, in effect, been much kinder to the IP and this article discusses some of these case decisions. |
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| News | ||||||
AMERICAS INSOL International Toronto Seminar, 20th October 2006 INSOL International is holding a one-day educational program focussed on current Canadian/American cross-border insolvency issues. Some of the most senior professionals in the field will explore a wide range of issues. For details please click here. www.insol.org/toronto06.htm Co hosted with: ABI, AAESI, AIRA, CAIRP, CBA, CLLA, IBGT, IAIR, IWIRC, TMA Insolvency Practitioners Association of Singapore Ltd (IPAS) The official launch of the Insolvency Practitioners Association of Singapore Ltd (IPAS) will be marked by an inaugural conference to be held on 2nd November 2006. INSOL is one of the supporting organisations of this conference. |
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| Publications | ||||||
EUROPE, AFRICA & MIDDLE EAST Lightman & Moss: The Law of Administrators and Receivers of Companies, 2006 In the UK the legislative changes in the past few years have made redundant the past administrative receivership systems that was then effective. The new 4th edition of this leading publication takes into account the legal developments in the UK covering the Insolvency Act 2000, Enterprise Act 2002, EC Regulation on Insolvency Proceedings 2000 and covers the current legal position and its effects. |
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This issue was kindly sponsored by:
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INSOL Contacts If you would like to send an article for inclusion in one of our forthcoming issues please contact our Technical Manager, Sonali Abeyratne at sonali@insol.ision.co.uk 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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