Corporate Rescue Law – An Anglo-American Perspective

Corporate Rescue Law – An Anglo-American Perspective

Corporations, Globalisation and the Law series

Gerard McCormack

This book offers an unprecedented and detailed comparative critique of Anglo-American corporate bankruptcy law. It challenges the standard characterisation that US law in the sphere of corporate bankruptcy is ‘pro-debtor’ and UK law is ‘pro-creditor’, and suggests that the traditional thesis is, at best, a potentially misleading over-simplification. Gerard McCormack offers the conclusion that there is functional convergence in practice, while acknowledging that corporate rescue, as distinct from business rescue, still plays a larger role in the US. The focus is on corporate restructurings with in-depth scrutiny of Chapter 11 of the US Bankruptcy Code and the UK Enterprise Act, and offers other comparative oversights.

Chapter 5: The Automatic Stay – Barring Individual Creditor Enforcement Actions

Gerard McCormack

Subjects: law - academic, company and insolvency law, corporate law and governance

Extract

4. Entry routes and corporate control This chapter looks at entry routes into Chapter 11 in the US and the administration procedure in the UK and considers, in particular, the different role that creditors play in channelling companies into these procedures. It also considers who is in control of the company during the course of these procedures – existing management or an externally appointed officer. One of the reasons that the US Bankruptcy Code, and in particular Chapter 11, has traditionally been seen as ‘pro-debtor’ is that proceedings are almost always begun by a voluntary petition filed by the corporate debtor.1 The filing brings about a moratorium or stay on enforcement proceedings against the company or its property and the incumbent management normally remain in place during the early stages at least of the reorganisation proceedings. In the UK, by way of contrast, companies will normally enter administration at the instigation of creditors though the formal appointment of an administrator may be made by the company. A general security interest holder has more or less an unfettered right to appoint an administrator to the company out of court. While an automatic stay or moratorium on creditor enforcement actions is also an intrinsic feature of the legislative landscape in the UK, administration is manager displacing. The appointment of an administrator means that the board of directors lose their management responsibilities. The chapter begins by looking at how companies may access the administration procedure/Chapter 11. It then considers the concept of ‘debtor-inpossession’ which...

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