Globalization is a hot topic these days. It should come as no surprise, then, that the challenges that come with having a global enterprise in financial distress can be complex. The panelists at the INSOL breakout session, Group next (or not): continuing challenges in the treatment of enterprise groups in insolvency, explored what happens when a global organization with businesses in multiple jurisdictions around the world tries to implement a cohesive and coordinated restructuring. The session was chaired by David Molton of Brown Rudnick, with panelists from South Africa (Professor Anneli Loubser of the University of South Africa), Brazil (Luiz Fernando V. de Paiva of Pinheiro Neto Advogados), and Australia (Macaire Bromley of DLA Piper), as well as INSOL Past President Neil Cooper.
Professor Loubser brought to the panel the perspective of developing countries. Her comments serve as a reminder that not every country believes that Chapter 11 is the best option for every company and that it is important to consider the culture of a country in addressing local insolvency issues. For example, Professor Loubser noted that Americans are more likely to embrace risk and to accept failure than South Africans. Although courts in South Africa are prepared to recognize foreign representatives, they likely will do so only after assurance that the local creditors and employees will be protected by the assets in South Africa. On the other hand, Ms. Bromley noted that issues with having to deal with local courts can sometimes lead to parties recognizing that a commercial and cooperative solution may be the only way to achieve a timely resolution of multi-jurisdiction approaches.
The UNCITRAL Model Law on Cross-Border Insolvency attempts to balance the interests of the group against the domestic entity, but fails to address the difficult notion of a “group COMI”. Instead, the focus in the law is more on procedural issues. Input from judges in the audience from New Zealand and Canada added color to the abstract concept of cross-border cooperation. Mr. Molton, on the other hand, raised the issue of whether other countries should follow the model of the U.S. and simply reject COMI to accomplish before one court a single global enterprise restructuring.
The case studies of Mirabela and Abengoa demonstrated some of the real life considerations facing companies seeking to restructure, as well as keys to a successful cross-border restructuring. Having fewer proceedings, fewer administrators (insolvency practitioners), more “debtor in possession”-type jurisdictions, and overwhelming support of the institutional creditors were some of the factors identified as keys to a successful cross-border restructuring.