Corporate Rescue Law – An Anglo-American Perspective
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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.
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Chapter 9: Conclusion

Gerard McCormack

Extract

8. The restructuring plan There are major differences between US and UK law when it comes to the formulation and acceptance of a restructuring or reorganisation plan for an ailing company. The main differences are threefold and could be summarised as follows. Firstly, in the US, the debtor has an exclusive right to formulate a reorganisation plan for a certain period of time whereas there is no such opportunity in the UK. Secondly, US law is much more prescriptive when it comes to division of creditors into classes. UK law is much less prescriptive in this regard. Thirdly, a class of creditors, including secured creditors in exceptional circumstances can be crammed down in the US, i.e. forced to accept a reorganisation plan against its wishes provided that at least one other class of impaired creditors has accepted the plan. In the UK, there is no facility for cramdown. The point has been made in previous chapters that ‘corporate’ rescue in the UK tends to take the form of business rescue through sale of all or part of the business as a going concern. In the US, more emphasis has traditionally been paid on getting the corporate vehicle back into proper working order, though going concern or asset sales have taken on a greater prominence in recent years. But perhaps because corporate revival is such a significant part of the traditional Chapter 11 landscape, the US reorganisation confirmation provisions appear to have been the subject of much greater debate and discussion...

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