Corporate Rescue Law – An Anglo-American Perspective
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Corporate Rescue Law – An Anglo-American Perspective

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.
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Chapter 7: The Role of Employees

Gerard McCormack


6. Financing the debtor As we have seen in previous chapters, the Enterprise Act 2002 radically redesigned the administration procedure into a more avowedly corporate rescue-oriented process. We have also noted that the Enterprise Act borrows from overseas models, including the US model, but it is not a direct transplant. A major feature of the US system, but not directly replicated in the Enterprise Act, is a mechanism for the financing of companies in financial difficulties.1 New finance is often critical to the survival of the business of the company. Unless such finance is available from some source, the assets of the company may have to be sold on a piecemeal basis and the company will be forced into liquidation. The DTI review of company rescue and mechanisms that preceded the Enterprise Act suggested that new secured finance is only available to support a rescue procedure in the UK where the existing secured creditors agree, or where there are unsecured assets or sufficient equity in secured assets. During the parliamentary debates, the government resisted an amendment that would have created a statutory framework for super-priority financing after the administration process has commenced.2 It was wary of creating a situation that would essentially guarantee a return to lenders advancing funds on the basis of such priority irrespective of the commercial viability of the rescue proposals. In its view, the issue of whether to lend to a company in administration was a commercial one that was best left to the commercial judgement...

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