ca A L S U C O F - INSOL International World/2015/INSOL World Q4 2015.pdf · PPB Advisory Sydney, Australia 4 Specialists in: Corporate Recovery Forensic Accounting Insolvency & Bankruptcy

The Quarterly Journal of INSOL International US$25

FO

CU

S:

Latin

Am

eric

a&

Offs

hore

3INSOL World – Fourth Quarter 2015

One of the fascinating features of comparative law is that seeinghow legal issues and practical problems are resolved in otherjurisdictions makes you better informed not only about these otherjurisdictions but also your own system. As you read the articles inthis issue you will, I’m sure, reflect as I do, both on the approachesof the local judges and practitioners and also on how your ownhome jurisdiction deals with similar problems.

In this issue we focus on Latin America and the offshorejurisdictions. We have combined pieces that provide an update onthe local economic and restructuring environment with articles thatanalyse cases of interest.

As regards updates and overviews, we have an article that reviews the challenges to restructurings in Brazil caused byBrazil’s economic difficulties as well as an update on the provisions in Chilean law that deal with cross-border insolvencies.We also have an article which explains the rules in Latin America which require steps to be taken before documents canbe used in local proceedings.

As regards recent judicial decisions, we have updates on a number of major cases involving cross-border litigation andrecognition disputes. The OAS Group involves insolvency proceedings and litigation in Brazil, New York and the BVI – andmultiple (and continuing) applications to court. One aspect relates to applications in the Bankruptcy Court for the SouthernDistrict of New York for Chapter 15 recognition of a number of judicial reorganisation proceedings commenced in Brazil. TheBankruptcy Court adopted a supportive and impressively internationalist approach. In one decision the Court held that alegal officer appointed by the directors of a Brazilian debtor after the appointment by the court of judicial administratorscould still be treated as a foreign representative (because the directors retained the requisite power to make the appointmentunder Brazilian law). In another decision that will be welcomed by offshore practitioners, the Court held that an Austrianincorporated SPV had its COMI in Brazil. In a further case the Court is being asked to decide whether to recognise aprovisional liquidator appointed over a BVI affiliate or to allow the Brazilian management of the affiliate to control thereorganisation under the Brazilian proceeding. In the equally significant and complex case of Baha Mar, there have beenChapter 11 proceedings in the Delaware Bankruptcy Court and winding-up proceedings (with the appointment of provisionalliquidators) in the Bahamas. Once again the Bankruptcy Court adopted an approach that was sensitive to the internationalcontext (by taking account of the concerns of a number of Bahamian stakeholders and creditors and respecting the offshoreproceedings) by deciding to dismiss the Chapter 11 case and abstain in favour of the Bahamian proceedings.

We also have articles that consider important case law developments in Cayman, Guernsey, Ireland and Australia. TheGrand Court in Cayman has considered again the status and treatment of shareholders in Cayman funds who haveexercised the right to redeem their shares but not been paid before the commencement of the winding up. In Guernsey thecourt rejected an attempt by a trustee in bankruptcy appointed in England to obtain an order compelling parties residentin Guernsey to provide information to the trustee without first obtaining from the English Court a letter of request. In Irelandthe High Court refused to accept that Mr Quinn, who resided in Ireland, had his COMI in Northern Ireland by virtue only ofcarrying out the administration of the majority of his affairs from the north. In New South Wales the court held that a securedcreditor who was subject to a deed of company arrangement remained able to appoint an administrator even though thedeed had resulted in the discharge of the secured creditor’s personal rights as a creditor.

So do enjoy your quarterly opportunity to devote some quality time to catching-up on comparative and cross-borderdevelopments!

As always I would like to conclude by expressing our thanks to Mourant Ozannes for sponsoring INSOL World and to DavidRubin & Partners for sponsoring the monthly Technical Electronic Newsletter.

BVI | CAYMAN ISLANDS | GUERNSEY | HONG KONG | JERSEY | LONDON

Leading offshore law firm Mourant Ozannes advises on all aspects of complex insolvency related litigation and corporate restructurings, providing pragmatic and workable solutions for clients. To find out more visit mourantozannes.com

Local expertise. International reputation.Sponsor of INSOL World

David Kidd Nicholas Segal Partner, Linklaters, Hong Kong Partner, Freshfields Bruckhaus Deringer LLP, UK / Judge, Cayman Grand Court, Cayman Islands

Editors’ Column

Nicholas SegalPartner, FreshfieldsBruckhaus Deringer LLP,UK / Judge, CaymanGrand Court, CaymanIslands

David Kidd Partner, LinklatersHong Kong

Dear Friends and Colleagues,

Developing regions - AsiaOne of my aims as President is to grow INSOL International’sfootprint in developing Asian countries. I am pleased toinform you that we are now planning events over the next fewyears around the Pan Pacific Rim to work to help establishnew Member Associations; to strengthen our membershipand to provide technical seminars of cross-border interest tolocal practitioners in those countries. The precedent that wehave used is the short seminar programme successfullyimplemented in the Latin America region, that created strongINSOL membership in the region.

Initially, in October this year we assisted with a trainingprogramme in Vietnam, at the invitation of the Ministry ofJustice. The programme was delivered by Neil Cooper andSijmen de Ranitz, Past Presidents of INSOL International,and Peter Gothard, Fellow, INSOL International, FerrierHodgson. We are very grateful for their efforts and expertise.

Further, we are planning a series of seminars in Indonesia,Malaysia, Thailand and Cambodia with additional events totake place in Vietnam. I am delighted that we are movingforward with this initiative and I look ahead to reportingfurther news from the region in future issues of INSOL World.

New Member AssociationsI am very pleased to announce the acceptance of KORIPA(Korea Restructuring and Insolvency PractitionersAssociation) as a member association of INSOL. This is anexcellent development, particularly in light of our efforts todevelop membership in the Asia Region.

We would also like to welcome the Recovery and InsolvencySpecialists Association of Bermuda, as INSOL continues itsgrowth in the offshore region.

Attendance at Member Association eventsThe INSOL Executive have been busy attending MemberAssociation events. The Finnish Insolvency Law Association(FILA) held its annual conference on 25 to 26 August. Theconference started with the opening remarks in Helsinki,followed by the technical programme delivered on a shipround-trip to Tallinn, Estonia. Richard Heis, INSOL ExecutiveCommittee, KPMG, attended the opening on behalf ofINSOL International and gave a presentation titled Whatmakes a good insolvency regime?, that was well receivedby the delegates.

INSOL Vice-President, Adam Harris of Bowman Gilfillan,was delighted to be able to attend the CanadianAssociation of Insolvency and Restructuring Professionals’(CAIRP) Conference in Whistler.

Adam and I also attended INSOL Europe’s annualconference in Berlin and look forward to joining the SouthAfrican Restructuring and Insolvency PractitionersAssociation (SARIPA) for their annual conference inJohannesburg on 26-27 November.

World Bank Africa Roundtable Since 2010 INSOL International and World Bank Grouphave jointly hosted an Africa Roundtable (ART) oninsolvency reform. This year’s ART explored the role thatinsolvency regimes play in contributing to financial sectorstability and the protection of creditor rights, with the themeRestoring Financial Sector Stability: the role of insolvencyregimes.

For the first time, this year we opened up the second day toall those interested in and affected by insolvency reform in

President’s ColumnBy Mark RobinsonPPB AdvisorySydney, Australia

4

Specialists in: Corporate Recovery Forensic Accounting Insolvency & BankruptcyCross Border Insolvency Litigation Support

For practical and confidential advice about insolvency, corporate and business recovery, contact:

Paul Appleton, David Rubin & Partners26 - 28 Bedford RowLondon WC1R 4HE

Telephone 020 7400 7900 email [email protected]

David Rubin, David Rubin & PartnersPearl Assurance House 319 Ballards Lane Finchley, London N12 8LY

Telephone 020 8343 5900 email [email protected]

Trudi Clark, David Rubin & Partners C.I. Limited

Telephone 01481 711 266email [email protected]

www.drpartners.com

INSOL World – Fourth Quarter 2015

5

Africa. This was to provide a greater forum for allstakeholders to engage in discussion and to learn frominternational best practice. The preceding day was a closedmeeting for policy makers, regulators and the judiciary whoalso attended the Open Forum on 13 October. A full reporton ART 2015 will follow in the next edition of INSOL World.

INSOL DubaiI look forward to welcoming you back to thebeautiful Madinat Jumeirah Resort that our conferencedelegates enjoyed so much in 2010. Apart from theamazing conference venue we also have a very strongtechnical programme running from 24 to 26 January 2016,which is contained in the registration brochure available onINSOL’s website.

INSOL 2017 - Tenth World International CongressPlans are well under way for INSOL’s Tenth QuadrennialCongress which will take place in 2017 against thedramatic back-drop of Sydney’s Darling Harbour, currentlybeing transformed into one of the most distinctive anddynamic new waterfront, business and leisure districts inthe world.

We look forward to welcoming accountants, lawyers,turnaround experts, judges, regulators, academics,lenders and alternate capital providers from around theworld to the Congress, where our technical programmewill support INSOL members’ role as leaders ininternational turnaround, insolvency, restructuring andrelated credit issues.

INSOL New YorkI am pleased to announce that we have just confirmed thedestination for our Annual Americas Conference in 2018which will be New York, from 29 April to 1 May 2018. Theconference will be held at the stunning Waldorf Astoria inthe heart of New York City. A very strong technicalprogramme will be developed to compliment this remarkable location, to make it a conference not to be missed.

INSOL Board changes On behalf of the Board of Directors of INSOL InternationalI would like to thank the outgoing Board Directors – JimLuby of McStay Luby, Ireland and Melissa Kibler Knoll ofMesirow Financial, USA and welcome Catherine Ottaway,Hoche Societe d’Avocats, France and Ron Silverman,Hogan Lovells US LLP, USA as representatives of INSOLEurope and ABI respectively on the Board of Directors ofINSOL. We are also pleased to have Nick Edwards ofDeloitte, UK representing R3, who joined the Board earlierin March, on the appointment of Richard Heis, KPMG, UKon to the Executive Committee of INSOL International as Treasurer.

I look forward to seeing many of you at the abovementioned Member Association events and elsewhere. Ifyou would like to drop me a line, please do so througheither my LinkedIn account at https://au.linkedin.com/in/markjulianrobinson or my email [email protected]


IN THIS ISSUE: page

Editors’ Column 3

President’s Column 4

Focus: Latin America & Offshore 6-25

Argentina – Recent Case Development: Involuntary 6Bankruptcy Petition based on an International Arbitral Award

OAS Group: A Tale of Two Chapter 15 Cases 8in the United States

Latest Amendements and Developments in Mexican 12Insolvency Law

Vietnam Insolvency Administrator Training 13

Cross-border Insolvency Regulation in Chile 14

INSOL Board Directors 14

Restructuring Solutions in a Scenario of Economic 16Depression and the Challenge for Everyone involved in These Processes in Brazil

Baha Mar, Cross-Border Conflict or Cooperation: 20Provisional Liquidators Appointed in The Bahamas asUnited States Chapter 11 Proceedings Are Dismissed

INSOL Dubai 22

Fellowship: 23Cross-Border Insolvency Proceeding. 23The Devil is in the Details: Legal Requirements forIncorporating Documents in Latin America

Richard Turton Award 24

Fellowship:Primeo v Herald – More Certainty for 25Unpaid Redeemers

G36 Feature: 26DOCA Held to Extinguish Secured Debts 26

INSOL International Group Thirty-Six 27

“Too Big to Fail” Intersects Chapter 15: Recognition 28Granted to Irish Bank Resolution Corp.

INSOL World Editorial Board 2015 28

Ian Strang Founder’s Award 29

INSOL International Insolvency and Trusts 30One Day Seminar – 9 September 2015

The Singular Minority - In the Matter of X (a Bankrupt) 32

INSOL Global Insolvency Practice Course 33Welcomes Eighth Class

Small Practice Feature 34Changes in the Bankruptcy Regime in Ireland to not 34Prevent Forum Shopping

INSOL International College of Mediation 35

INSOL International Academics’ Group 36

INSOL Academics’ Colloquium 37

INSOL 2017 37

Conference Diary 38

Member Associations 38

6 INSOL World – Fourth Quarter 2015

Focus: Latin America & Offshore

Argentine insolvency law is governed by Act No. 24,522 of July 20, 1995, as amended in 2002 (Act 25,589) 2006 (Act 26,086) and 2011 (Act 26,684), the ArgentineInsolvency Law (the “AIL”). The AIL outlines three types of court-supervised proceedings that may voluntarily be commenced by a distressed company: (i) areorganization proceeding, referred to as a ConcursoPreventivo; (ii) an Acuerdo Preventivo Extrajudicial, arestructuring proceeding which is similar to a US“prepackaged” Chapter 11 proceeding; and (iii) a Quiebra, or liquidation proceeding, comparable in goals to a US Chapter 7, performed under court controland supervision, seeking to liquidate the bankruptcompany’s assets and distribute the proceeds among its creditors in proportion to their respective claims and/or credit.

As happens in many other insolvency systems, there aretwo ways to open a liquidation process: the voluntaryproceeding, filed by the debtor, and the involuntaryproceeding, filed by a creditor.

In a recent case, the National Court of Appeals inCommercial Matters, Chamber A (the “Upper Court”)issued a ruling dated August 18th, 2015 (the “Ruling”)which unanimously rejected a challenge to an involuntarypetition for bankruptcy based on an arbitration award ofthe International Centre for Settlement of InvestmentDisputes (“ICSID”).

In re “CCI- Compañía de Concesiones de InfraestructuraS.A. bankruptcy petition (Republic of Peru)”, the creditor was the Republic of Peru which had filed thepetition in bankruptcy of the debtor based on a 2013 finalaward (the “Award”) for the costs of the arbitrationproceedings.

The Award expressly stated that CCI was required to paythe fees and costs of the proceedings to the Republic ofPeru, which amounted to USD 2,117,489.27.

The Republic of Peru relied on Section 54 of theConvention on the Settlement of InvestmentDisputes between States and Nationals of OtherStates (the “ICSID Convention”), an internationaltreaty approved by the enactment of Act 24,353 ofArgentina.

In Argentina, the ICSID Convention, has full forceand effect since under the constitution (Section 31of the National Constitution), international treatiestake precedence over domestic laws – includingthe other provisions of the national constitutionitself (Section 75 subsection 22 of the National

Constitution). Section 54 of the ICSID Conventionenumerates the general provisions applicable to all arbitration awards. In relation to this case, it states the following:

“Each Contracting State shall recognize an awardrendered pursuant to this Convention as binding andenforce the pecuniary obligations imposed by that awardwithin its territories as if it were a final judgment of a court in that State. A Contracting State with a federalconstitution may enforce such an award in or through itsfederal courts and may provide that such courts shall treatthe award as if it were a final judgment of the courts of aconstituent state.”

“A party seeking recognition or enforcement in theterritories of a Contracting State shall furnish to acompetent court or other authority which such State shallhave designated for this purpose a copy of the awardcertified by the Secretary-General.”

Although under the ICSID Convention sovereigns can onlybe defendants but not plaintiffs, in this particular case,after deciding against the CCI, the award determined thatall the fees and costs of the arbitration proceeding shouldbe paid to the Republic of Peru by CCI.

Section 61 of the ICSID Convention (relevant with respectto the relation between the award and the costs of the arbitration proceedings) provides the following: “In the case of arbitration proceedings the Tribunal shall,except as the parties otherwise agree, assess theexpenses incurred by the parties in connection with the proceedings, and shall decide how and by whomthose expenses, the fees and expenses of the members of the Tribunal and the charges for the use of the facilitiesof the Centre shall be paid. Such decision shall form partof the award”.

Based on the award in this case which required CCI to pay the costs, the sovereign filed an involuntary

Argentina – Recent Case Development: Involuntary Bankruptcy Petition based on an International Arbitral Award

By Javier A. LorenteNTMDALLBuenos Aires, Argentina

and

Ariel Di BártoloDBGM AbogadosBuenos Aires, Argentina


bankruptcy petition against CCI.

At first instance, and without even hearing CCI, the lowerCourt denied the involuntary petition on the ground thatthe Republic of Peru could not rely on the award in theabsence of a previous exequatur (which acknowledgesforeign rulings and awards in Argentina and makes themenforceable). The award alone could not be considered avalid title to prove the existence of a liquid and payabledebt, and thus, it could not prove the insolvency attributedto the defendant.

However, on appeal this approach was rejected. The Rulingmakes a distinction between on the one hand merely foreignawards or ruling and on the other international awards andrulings, based on Section 54 of the ICSID Convention. TheUpper Court held that it was unnecessary to subject theaward to the acknowledgment process set forth in the Codeof Civil and Commercial Procedure (Sections 517 et seq, ofwhich set forth the legal basis for recognition of foreigncourts’ orders in Argentina).

Subsection 4, Section 517 of the Civil and CommercialProcedure Code provides, in substance, that a foreignjudgment will not be executed, or given effect, if thejudgment is contrary to Argentine laws of public policy. Inthe opinion of scholars, public policy consists in “the bodyof principles established in defense of the local legislativepolicy, which are in an underlying state and are intendedto prevent foreign laws from distorting such principles.This is the system adopted by our legislation, whichauthorizes judges to decide, prior to applying a foreignlegislation, whether or not such foreign legislation issuitable for governing a legal issue, without violating

the general principles of the local body of laws”.

Specifically with respect to foreign arbitration awards,Section 519 of the above mentioned Civil and CommercialProcedure Code states that the awards rendered byforeign arbitration tribunals may be executed according tothe procedure established and meeting the exequaturrequirements set forth in Section 517 et seq.

But in the present case, the Upper Court, distinguishedbetween a foreign arbitration award (subject to theexequatur proceeding) and an international arbitrationaward (directly enforceable in Argentina pursuant toSection 75, Subsection 22 of the National Constitution),and decided in favor of the sovereign and allowed theinvoluntary bankruptcy proceeding to proceed.

The Upper Court decided that a legalized copy of theinternational award itself, without any need for theexequatur process gave sufficient title to prove not onlythat the creditor had an enforceable claim (Section 80 AIL)but also that the lack of payment of such claim constitutedsummary proof of that the debtor was insolvent (Section83 AIL).

Even within its limited scope, the Ruling is – to the best ofour knowledge - the first case in which an Argentine courtallowed direct enforcement of an international arbitrationaward within a bankruptcy environment by granting themost expeditious track to such award. It shows that at leastpart of our national judicial system clearly states thatinternational treaties and contracts are meant to berespected and that investment, whether national orinternational, must be protected.


IntroductionUntil recently the Brazilian economy experienced a periodof significant growth, attracting substantial foreigninvestment and leading many to believe that Brazil waspoised to make the leap from emerging economy to worldeconomic power. However a series of dubious economicdecisions, coupled with rampant government spendingand troubling corruption scandals, have halted Brazil’sgrowth and dragged the country again into financialuncertainty.

Critical to this scenario has been the so called “Car Wash” operation of the Brazilian federal police, which hasbeen investigating well-publicized corruption involvingPetrobras, Brazil’s state-controlled oil company, publicofficials and several of Petrobras’ contractors. As a result,a number of these contractors, including some of Brazil’sbiggest construction companies, have been facingsignificant financial problems.

Among such troubled companies is the OAS Group, amajor Brazilian conglomerate which filed for judicialreorganization under Brazilian law in March of 2015, aftera series of unsuccessful efforts to restructure out of court.In the course of those efforts the OAS Group engaged ina series of transactions that made changes to the overallcorporate structure and transferred assets amongmembers of the group.

The recent decision of the US Bankruptcy Court in theSouthern District of New York to grant recognition of theBrazil proceedings over the fierce opposition of certain USbondholders aggrieved by those transactions shedsfurther light on the authority of a “foreign representative” toseek cross-border recognition under Chapter 15 and theUNCITRAL Model Law on which it is based, and onquestions relating to the “center of main interests” of aforeign entity with no real business operations of its own.2

In addition, the separate Chapter 15 case arising from theefforts of those bondholders to pursue their claims against

a British Virgin Islands member of the OAS Groupraises unique issues relating both to cross-borderrecognition and more fundamentally to the right tocontrol over multi-jurisdictional restructurings.3

The OAS Brazil Reorganization and USChapter 15 CasesAuthority of the “Foreign Representative”In addition to Brazilian creditors, at the time of filingfor judicial reorganization in Brazil the OAS Groupowed approximately US$ 875 million to holders of

senior notes issued by certain OAS single purposesubsidiaries and guaranteed by other companies in thegroup. Seeking to maintain the “structural seniority” that theyand other holders of those notes enjoyed over generalcreditors prior to the internal restructuring process, two ofthe major US noteholders brought litigation against certainmembers of the OAS Group in the New York state courtsand succeeded in attaching liquid assets located in theUnited States. Additional litigation followed in the state andfederal courts in New York as well.

Against this backdrop, it was not surprising that thesesame noteholders objected to recognition of the Brazilreorganization proceedings in the Chapter 15 casescommenced in respect of four OAS Group entities in theSouthern District of New York in April of 2015.4 Thenoteholders challenged the recognition of the Brazilianproceedings on several bases, most significantly that the“foreign representative” who commenced the Chapter 15cases had not been properly appointed in the “foreignproceeding,” and such that application for recognitionfailed to comply with the requirements of section 1515(a)of the Bankruptcy Code.

This controversy arose from the fact that after the Braziliancourt had appointed Alvarez & Marsal to the statutory role of judicial administrator in the Brazilian proceedings,the OAS board of directors appointed the legal officer for several of the OAS companies as OAS Group’s agentand attorney-in-fact for purposes of seeking recognitionin foreign jurisdictions. In support of their objection thenoteholders relied on Section 101(24) of the BankruptcyCode, which defines “foreign representative” as “a personor body, including a person or body appointed on aninterim basis, authorized in a foreign proceeding toadminister the reorganization or the liquidation of thedebtor’s assets or affairs or to act as a representative ofsuch foreign proceeding.” 11 U.S.C. §101(24) (emphasisadded). Thus, the noteholders argued, the mere act of appointment by the OAS board was not sufficient, andthe Chapter 15 cases were not commenced by an

OAS Group: A Tale of Two Chapter 15 Cases in the United States

By Mark D. Bloomand Vitor Araujo Greenberg Traurig LLP1Miami, USA

1 Mr. Bloom is co-chair of the Global Reorganization practice group and Mr. Araujo is a Brazil-licensed foreign law clerk at Greenberg Traurig, both resident in the firm’s Miami, Florida office.2 In re OAS S.A., et al., Case No. 15-10937 (SMB) (Bankr. S.D.N.Y.) (July 13, 2015).3 In re OAS Finance Ltd., Case No. 15-11304 (SMB) (Bankr. S.D.N.Y.)4 Separately in April, the noteholders filed a petition in the British Virgin Islands and obtained the appointment of joint provisional liquidators for OAS Finance, a BVI member of the OAS Group. Upon their appointment the JPLs directed that the Chapter 15 petition in respect of OAS Finance be withdrawn. In addition, the JPLs sought recognition of the BVI proceeding by filing separate Chapter 15 case in May, which case remains pending before the same bankruptcy judge in the Southern District of New York.


authorized foreign representative.5

In overruling this objection, the Bankruptcy Court focused onthe definitional language “authorized in a foreignproceeding” and relied on a previous decision by the FifthCircuit Court of Appeals holding such language to mean“authorized in the context of or in the course of a foreignproceeding.”6 On this basis, the bankruptcy judgedetermined first that the Chapter 15 representative need notbe appointed specifically by the foreign court — thatappointment by the debtor’s board of directors will suffice forsuch purposes when the applicable foreign law permits thecompany in reorganization to maintain control of its assetsand affairs. Looking next to Article 64 of Brazil’s bankruptcylaw and an affidavit furnished by OAS Group’s Brazilianbankruptcy counsel, the Court determined that the role ofthe judicial administrator under Brazilian law was largelysupervisory and not managerial, that OAS managementretained full control over the companies’ business and affairssubject to the oversight of the administrator, and accordinglythat OAS Group was acting in the nature of a debtor inpossession. Thus, the appointment of the legal officer as“foreign representative” by the OAS boards of directors wasvalid and empowered him to seek recognition by filing theChapter 15 cases in the US.

Determination of the “Center of Main Interests”The noteholders also opposed recognition of the Brazilcase filed in respect of the primary issuer of the notes, anAustrian special purpose entity that had no independentbusiness operations, employees or assets, on the basisthat this member of the Group did not have its “center ofmain interests” in Brazil. The facts were uncontrovertedthat this entity had no physical location in Brazil, that itsaddress in that country was merely a post office box, andthat all of its obligations were represented by notes issuedto international investors.

Nevertheless, the bankruptcy judge rejected thisargument, finding the COMI to exist in Brazil on multiplegrounds, including that the Brazilian guarantorsrepresented the only source of repayment and the Boardactions undertaken by the Brazilian directors took place inBrazil. The Court also found it probative that the noteswere unconditionally guaranteed by members of the OASGroup in Brazil, and that since the disclosures in theoffering documents focused on the Brazilian operationsand risk factors investors necessarily analyzed credit riskand formed payment expectations based upon businessactivities conducted in Brazil. Upon these factors, theCourt found Brazil to be the center of main interests for theAustrian entity for purposes of the Chapter 15 recognition.

The OAS Chapter 15 decision showcases some importantaspects of complex cross-border reorganizations. Byaccepting the Boards’ appointment of a “foreignrepresentative” during the Brazil reorganization proceed-

ings, the New York court follows and lends support to theFifth Circuit’s flexible internationalist approach in lieu of amore literal reading of section 1515(b) of the BankruptcyCode. Further, the decision regarding the COMI of the threeOAS Group members obligated on the US notes offerssignificant precedent for investors in other special purposevehicles utilized to raise funds in international capitalmarkets. In both respects, the decision is consistent with theoverall purpose of Chapter 15 and the Model Law on whichit is based, to facilitate cross-border recognition ofinsolvency proceedings commenced in the distressedcompany’s center of main interests.

The OAS BVI Proceeding and US Chapter 15 CaseWhile the recognition decision in the Chapter 15 casesemanating from Brazil is a matter of significant interest, itshould not be lost on the reader that the OAS dramacontinues to unfold in the separate Chapter 15 casepending before the same bankruptcy judge in respect ofthe BVI provisional liquidation. At the foundation of thatcase is the underlying issue of whether the restructuring ofthe BVI affiliate should be controlled by the jointprovisional liquidators in the BVI who filed the petition forrecognition, or the incumbent management of the OASGroup in Brazil. More fundamentally, inasmuch as the BVIJPLs were appointed upon application of the USnoteholders to begin with, this Chapter 15 case raises amyriad of issues regarding the role of activist creditors inmulti-jurisdictional insolvency proceedings.

Indeed, this appears to be the precise issue with which thebankruptcy judge is wrestling as his decision on whetherto grant recognition of the BVI proceeding as a foreignmain proceeding remains pending. The OAS Group hasobjected to such recognition on multiple grounds, urgingthat the restructuring of the BVI entity remains under thecontrol and direction of OAS Group management in theBrazil restructuring proceedings, such that the COMI ofthe BVI affiliate remains in Brazil. At the final hearing onrecognition held this past August, the judge remarked thatthe COMI dispute arose only because the US noteholdersinitiated the BVI proceeding in the first instance.

In the meantime, the separate proceedings in Brazil andBVI remain pending, with little apparent coordinationbetween them. The court in Brazil recently approved afinancing package intended to provide an infusion ofworking capital to fuel the reorganization in that country,and the BVI court has been asked to clarify issuesregarding the residual authority of the BVI companydirectors following the appointment of the JPLs. Ultimately,the US court will determine whether to follow the lead ofthe JPLs in granting recognition to the BVI proceedingcommenced by the US noteholders, or uphold the view ofthe OAS Group directors that notwithstanding the BVI filingand appointment of the JPLs the center of main interestsfor the BVI affiliate remains in Brazil.

5 The position of the bondholders finds textural support in the plain meaning of various provisions contained in section 1515(b) of the Bankruptcy Code, which among other things requires that a petition for recognition under Chapter 15 be accompanied a decision or certificate from the foreign court affirming the appointment of the foreign representative, or other acceptable evidence of such appointment. 11 U.S.C. §1515(b).6 Ad Hoc Grp. of Vitro Noteholders v. Vitro S.A.B. de C.V. (In re Vitro S.A.B. de C.V.), 701 F.3d 1031 (5th Cir. 2013), cert. dismissed, 133 S. Ct. 1862 (2013). Notably, the New York court located in the Second Circuit was not bound to follow this precedent from the Fifth Circuit, but chose to do so in order to reach its result.



On January 10, 2014, the Official Gazette publishedvarious amendments to the Mexican Bankruptcy Law (Leyde Concursos Mercantiles), that governs the insolvencyprocess.

Many of the amendments focused on problems thatoccurred in previous proceedings or reorganizationsprocesses (Mexicana Airlines, Vitro, etc). Some we cansay are much needed improvements but some others willundoubtedly bring new problems to be dealt with.

The Vitro experience can be held responsible for theintroduction of a new class of creditors in addition to theexisting Secured and Unsecured division in Mexican Law.The new definition is of the “subordinated creditor” and itrelates to those businesses or companies that have thesame board of directors as the debtor or who arecontrolled directly or indirectly by the debtor.

According to this amendment a “subordinated creditor”cannot hold more than 25% of all the debtor’s debt; if itdoes then it cannot be counted as part of the 50% neededfor approval of the restructuring plan. This means that inpractice subordinated debt must be below 25% of all debtin order to be part of the votes needed to achieve the 50% threshold.

A second amendment was due to the Mexicana Airlinescase, in which the Federal judge kept stretching theconciliation period by giving extensions to the debtor toreach an agreement with its creditors, substantiallyexceeding the 365 days that the Concurso law gives to theparties. Article 7 prohibits judges from giving moreextensions, which contradicts the spirit of the ConcursoLaw under which the main purpose of the Law is to keepbusinesses alive. Of course there are many examples ofcases that continued for years as the Mexicana Airlinescase did without any real investor behind a seriousrestructuring plan.

The amendments introduce a concept of “imminentinsolvency”, and create the right for a company to enter arestructuring (concurso) process if in fact it is inevitable

that a debtor faces insolvency in a period of no more than90 days.

Going against the Mexican Federal Civil Code’s generalobligations provisions in which any debt reduction wouldbenefit a co-debtor, the amendments limit the compromiseof a debt under which a co-debtor is also liable with thedebtor to the debtor subject to the Concurso Process.

Also a very debatable and doubtful amendment was madeto the automatic stay applicable if a Concurso process isadmitted and declared, because there will be anexception to the stay and enforcement of a claim cancontinue, if its collateral is real estate or property that isnot “strictly indispensable” for the operation of thedebtor’s business. This ruling to this effect could be madeby the judge in charge of the Concurso process prior tothe opinion of the Conciliator (trustee) designated in suchrestructure process.

Trying to create the momentum for DIP Financing, which iscurrently almost non existent in Mexican restructuringprocesses, article 75 authorizes the debtor in a concursoprocess to enter into new debt if its “indispensable” tocontinue the operation of the debtor’s business. Such DIPFinancing is entitled to priority in repayment over all ormost all other claims of general unsecured creditors.

The amendment also incorporates a new requirement thatany voluntary petition of Concurso be accompanied by arestructuring Plan Project and all (voluntary or involuntarypetitions) must be done in the IFECOM2 forms. Thisamendment tried to make the petitions simple and easybut gives rise to a new practical problem for the petitioner.

A new requirement is needed for voluntary concursoproceedings to begin, as this reform imposes anobligation on the debtor to present as an exhibit the deedof the shareholders meeting in which the authorizationwas given to the legal representative.

This amendment to the Mexican Concurso law alsointroduces a section of responsibilities and duties ofdirectors and managing officers of a debtor that has beendeclared in Concurso, that make them liable for actionsbefore the commencement of the process. The benefit ofany compensation payable as a result of any action(losses and damages) will become part of the estate ofthe company subject to the concurso process.

At the upcoming INSOL One Day Seminar to be held inMexico City in March 2016, we will address the problemsarising from these amendments and recent cases thatcontinue to demonstrate the need for a more effectiveinsolvency process.

Latest Amendements and Developments in Mexican Insolvency Law

By Jorge J. Sepúlveda1

Bufete Garcia Jimeno, S.C.Mexico City, Mexico

1 Partner at Bufete Garcia Jimeno, S.C. Head of Insolvency Litigation. Professor of Insolvency Law at Universidad Iberoamericana in Mexico City. Founding member of IIDC. Member of INSOL, Latin American Committee. Chair of the MOC for INSOL Mexico One Day Seminar to be held in March 2016.2 IFECOM stands for Instituto Federal de Especialistas Concurso Mercantiles, a federal jurisdictional arm of the Judiciary, responsible for the designation of the trustees in any Concurso Process.


Our funding enables legal claims

to be investigated and pursued

to fi nality.

All costs of litigation are covered

– including insolvency practitioner

fees and adverse costs.

We put our money at risk, enabling

any existing funds to be paid to

creditors as a dividend.

You can read about our track

record and fi nancial strength at

www.imfbenthamltd.com

We level the playing fi eld.

Put fuel in your tank

By Neil Cooper, Past President INSOL International

In 2014, Vietnam introduced a new insolvency lawincluding, for the first time, the concept of licensed,regulated insolvency practitioners. This reform wasachieved under the guidance of the IFC, part of the World Bank Group. To assist in understanding what isinvolved in the development of such a regime, a high leveldelegation from Vietnam comprising delegates from theVietnamese Ministry of Justice, the Supreme PeoplesCourt and the Ho Chi Min Bar Association came to Londonin July 2015. In the course of the meetings at INSOLInternational, the delegation requested the assistance ofthe IFC and INSOL in training the first newly licensedinsolvency professionals.

Assurances of support in response to requests of thisnature are easy to give but the requests often disappear.Not in this case. No sooner had the delegation returnedhome than dates were set for the training – two monthsaway! In almost record time, INSOL International, inconjunction with the World Bank Group, agreed a syllabusand format of the basic training.

Training was delivered to over 100 lawyers, accountantsand judges in Hanoi and Ho Chi Minh City in October over two consecutive days in each city by past-presidents

Neil Cooper and Sijmen de Ranitz and Peter Gothard,Fellow, INSOL International, Ferrier Hodgson, member firmof G36, under the watchful eye of Susannah DrummondMoray of INSOL who is leading the charge in developingINSOL’s presence in this region. The training covered thethorny issues of ethical conduct and professionalstandards; engagement management; assessment of thedebtor’s business and case strategy; maximizing the valueof the debtor’s assets; and agreeing and paying claims.

The training included case studies and was generallyhighly participative in both locations. Overall, we have hada very positive response from those who attended thetraining with a clear appetite for further courses.

It has been requested that the first stage training be rerunnext year to cope with Practitioners who could not attendthe first course and a second round of training to covermore complex insolvencies; restructuring and cross-border issues will take place next Spring.

INSOL is delighted to be able to work with the World BankGroup on such matters and to further develop connectionswith this fast growing economy that is of interest to manyINSOL members in developed economies. We have our firstINSOL individual members from a leading local law firm andthere is enthusiasm to establish a national association.INSOL is delighted to support them going forward.

Vietnam Insolvency Administrator Training


INSOL BOARD DIRECTORS

Executive Committee DirectorsMark Robinson (Australia) President

Adam Harris (South Africa) Vice-President

Richard Heis (UK) TreasurerJulie Hertzberg Executive CommitteeClaire Broughton (UK) Executive Director & Company Secretary

Board DirectorsScott Atkins Australia ARITAFellow, INSOL InternationalJasper Berkenbosch The Netherlands INSOLADFellow, INSOL InternationalStephen Briscoe Hong Kong HKICPAPaul M. Casey Canada CAIRPJuanito Martin Damons South Africa SARIPANick Edwards UK R3Brendon Gibson New Zealand RITANZLi Shuguang* PR ChinaLeonardo Morato Brazil TMACatherine Ottaway France INSOL EuropeRon Silverman USA ABIAndrew Thorp BVI RISA (BVI)Mahesh Utttamchandani* The World Bank

*Nominated Director

Past PresidentsIan K. Strang (Canada)Richard C. Turton (UK)C. Garth MacGirr (Canada)Richard A. Gitlin (USA)Stephen J. L. Adamson (UK)Dennis J. Cougle (Australia)R. Gordon Marantz (Canada)Neil Cooper (UK) John Lees (Hong Kong)Robert S. Hertzberg (USA)Sijmen de Ranitz (Netherlands)Robert O. Sanderson (Canada)Sumant Batra (India)Gordon Stewart (UK)James H.M. Sprayregen (USA)

Scroll of Honour Recipients1989 Sir Kenneth Cork (UK)1993 Ronald W. Harmer (Australia)1995 Gerry Weiss (UK)2001 Neil Cooper (UK)2001 Gerold Herrmann (UNCITRAL)2005 Stephen Adamson (UK)2010 Jenny Clift (UNCITRAL)2013 Ian Fletcher QC (UK)

In recent years, trade across the world has beenglobalized to such an extent that globalization is now thenorm in economic trade and investments. For this reasonmost modern bankruptcy laws have adopted insolvencyrules aimed at dealing with and regulating cross-bordercases, i.e., cases when the bankruptcy of a debtortranscends borders or boundaries of the country thatopened the insolvency procedure, in order to includecreditors and assets located abroad. However, the formerChilean bankruptcy law, contained in Book IV of theCommercial Code, did not include any regulation oncross-border insolvency cases, except for rules regardingthe giving of notice to foreign creditors.

Nonetheless Book IV of Title IX of the Convention onPrivate International Law (the Bustamante Code) includessome provisions dealing with cross-border insolvencies.The Convention has been ratified by 15 countries, (usuallywith some reservations) including Chile, which ratified it in1933 and published it in 1934.

The Convention contains a number of provisions dealingwith bankruptcy matters. There are eight provisionsscattered in three chapters, namely: (i) the unity of thebankruptcy or insolvency; (ii) the universality ofbankruptcy or insolvency and its effects; and (iii) theagreement and rehabilitation of the debtor.

The Convention and its application give rise to thefollowing problems:

1. Chile ratified the Convention with general reservations,so that it is necessary to reconcile and integrate theConvention’s rules with domestic law. For example,provision 415 of the Convention establishes theplurality of bankruptcy or territoriality by providing that if a person or company has commercialestablishments in more than one country it may have as many preventive and bankruptcy trials as thecommercial establishments it possesses. Thiscontrasts with the position under domestic law. Giving effect to the Bustamante Code would requirethat a person who has several commercialestablishments can be declared bankrupt in each ofthem. Thus, the debtor in an insolvency proceedingcould be the commercial establishment and need not be a natural or legal person, as required byprovision 1 of Book IV of the Commercial Code. Thisresult is inconsistent with the requirement, contained in provision 2 of Book IV of the Commercial Code, for the universality of the bankruptcy which requiresthe indivisibility of the proceeding so that thebankruptcy proceeding covers all assets and liabilitiesof the debtor

Cross-border Insolvency Regulation in Chile

By Nicolás Rodrigo Velasco JenschkeSuperintendency of Insolvencyand Entrepreneurship Santiago, Chile


Harney into Be

ys is pleased to announc ermuda and the launch

restructuring and inso

ce our expansion h of our Bermuda

olvency practice.

S YHARNE | Bermuda

i l b l d i lom .csneyhar m | om.cs�dneyhar

ambers.C Ch BL an association withroughMauritius service provided th

nguilla AmudaerB

Islandsin giritish VBryman IslandsaC

yprusC

Hong Kong ondonL

itiusaurMevideotonM

auloao PSeSingapor

oykToerouvancVVanc

.tserxpy eencturing and insolvucestrlobal rG

2. Because the Bustamante Code is an internationaltreaty, its effectiveness is restricted to the signatorystates. This involves a number of practicalshortcomings in the implementation of its rules,resulting in an increase in the workload of Chileanjudges. They are required to determine whether theBustamante Code is applicable for cross-border casesin accordance with the legal reservations adopted byChile. In addition, judges have to distinguish whetherthe country of origin from which the exequatur issuedhas also adopted the Convention on PrivateInternational Law, whether it was made with or withoutreservations, and the content and effect of any suchreservations.

3. The requirement that judgments of foreign courts must undergo the exequatur procedure before they can be enforced in Chile involves obvious delay, thereby damaging efficiency to the bankruptcyprocess. In insolvency cases, speed in theredistribution of the debtor’s assets to creditors willproduce a higher recovery and, therefore, a greaterbenefit to creditors.

4. Provision 16 of the Chilean Civil Code provides thatassets located in Chile are subject to Chilean law, evenif their owners are foreigners and reside abroad.Provision 420 of the Bustamante Code however states that actions and rights “in rem” remain subject to the law of the location of assets and thecompetence of local judges. However the ChileanSupreme Court has held that the Bustamante Code should not be applied in cross-border insolvencycases and has required that a foreign creditor mustsatisfy Chilean law (by satisfying the requirements of and establishing the grounds under Book IV of theCommercial Code) in order to be able to commence

a universal liquidation procedure in Chile.

5. Finally, the Bustamante Code does not regulate certainbasic procedural aspects of bankruptcy such asforeign creditors notifications, the way in which assetsshould be liquidated, how creditors should verify theirclaims and the order in which the foreign claims shouldbe paid.

Based on the situation explained above and the significantincrease in cross-border insolvency cases all over theworld in the decade of the 90s, it was necessary to updatethe Chilean Bankruptcy Law through the adoptionUNCITRAL Model Law on Cross-Border Insolvency in theLaw N.° 20,720 on Insolvency and Entrepreneurship – inforce since October 9th 2014.

The UNCITRAL Model Law was adopted in order to clarifythe position and improve predictability and transparency.The new law created the necessary rules instrument toresolve disparities and conflicts that may arise betweennational and foreign laws.

We are certain that the incorporation of this uniform textsecures efficiency, expedition and proceduraltransparency, legal certainty and clarity regarding theactions and measures to be applied, and the effectsresulting from the different procedures where the law isapplied. Such uniformity is essential to the implementationof equal standards in the different legislation at judicialand administrative coordination in insolvency procedures.Today, almost a year after enforcement of the Law No.20,720 which incorporates the UNCITRAL Model Law, ourcourts have not yet received any applications concerningcross-border insolvency cases. When such applicationsare made, we trust that our judges and authorities will takeadvantage of and use the new tools to good effect.


Brazil’s economic outlook for the next twelve monthsappears to be less rosy than predicted by some pro-government politicians. The latest forecast is that of arecession that may take GDP into negative territory for2015 in the order of -2.5%, and -1.5% for the first half2016, and currency devaluation against US$ picking 60%in 2015.

The problem is compounded by a series of features thathave an adverse impact on microeconomic issues. Thecrisis was already in the air a few years ago, caused by aseries of misguided fiscal policies that were unable toreduce the effect of unproductive interventionism and onlyamounted to political proclamations. In addition, long-termpolicies capable of giving impetus to the batteredindustrial park were never discussed leaving it in a verycritical condition.

Today many companies in the textile sector, sugarcane,automotive parts, oil and gas, civil construction industry,heavy construction industry are in deep crisis, inbankruptcy protection or shut down. Added to this is thewidespread paralysis triggered by the bribery andcorruption scandals, which began and continue as a giantdomino to hit companies in sectors involved in theinvestigations and in all its supply chain, including smalland large suppliers.

In this climate of turmoil, financial institutions tend to bemore conservative and rigid in their lending activity,reassessing the situation in many sectors and / or inrelation to their clients in order to reduce or control theirexposure. In Brazil banks are subject to very strict controlsby the Central Bank of Brazil, which imposes precise andobjective rules relating to provisions for risks inherent tothe credits granted.

In this very gloomy scenario, many financial institutions aretrying to avoid surprises from customers that may think offiling a judicial reorganization proceeding, or RJ (localChapter 11). This refers to companies from various sectorsshowing a still limited deterioration in their businessfundamentals, but with an unbalanced capital structure,needing the extension of short-term funding in order to allow greater operational and structural adjustmentsand / or reduction of financial leverage by selling assets via M&A transactions.

Anticipating these developments, banks areadopting solutions which grant companies thetime to work on a turnaround and / or seekpartners by selling part or all of their business toreduce debt. In this situation standstill agreementsare becoming quite common in Brazil, providedthat certain parameters of corporate governanceand accountability are met. By doing this outsideof a bankruptcy, they are avoiding the destructionof value that normally occurs in lengthy and costlybankruptcy procedures, and, if the agreementsare reached very quickly, they also allow the

company to start down a recovery path without majordisruption to its operations.

This approach is very practical and aims to preserve valueto both parties: lenders and borrowers. The question ishow to answer a series of issues facing the stakeholdersof typical family business in Brazil, such as:

1. Are there enough unencumbered assets left behind to support the raising of new money necessary to deal with the liquidity constraints the business is facing?

2. How to convince shareholders of a typical family business in Brazil to adopt a “flexible” solution in the M&A process?

3. How to sell assets or the whole business in a scenario of economic depression that can last for long periods during which prices remain low and below the desired value?

4. Who is going to manage the turnaround process? and last but not least,

5. How to bring together all creditors, sometimes with conflicting interests, around quick solutions?

The most critical point issue is how to preserve value thatwould be destroyed by confrontation between debtor andcreditors. Brazilian law provides for an out-of-court pre-packed alternative (REJ) that has been seldom used andhas become quite a forgotten chapter of the law. A REJconsists in the court approval of a restructuringagreement with creditors representing 3/5 of all credits ofa given class. The REJ however is not applicable to taxcredits and to secured credits. In other words, the RJEwould extend, in the form of a cram-down, a standstillagreement and the subsequent terms and conditions of anegotiated agreement to all creditors of a given class.

The downside of an REJ vis a vis an in-court restructuringis the absence of a stay-of-execution until the courtconfirms the agreement and the impossibility of the debtorselling assets free and clear. On the other hand, the RJEdoes not require the appointment of a judicialadministrator to follow-up on the activities of the debtorwith related costs. The priority given by Brazilian law topost-petition credits in an in-court restructuring as a matterof practice is useless because experience shows that asa debtor approaches an in-court restructuring most, if not

Restructuring Solutions in a Scenario of Economic Depression and the Challenge for Everyone involved in These Processes in Brazil

BySalvatore MilanesePantalica Partners

andAntonio CarlosMazzucoMHM AdvogadosSao Paulo, Brazil


all, of its assets are already encumbered by a fiduciaryassignment to keep the credit insulated from the effects ofa such a restructuring. The priority given to post-petitionlenders is subordinated to the rights of fiduciary creditors.

Tough out-of-court negotiations may not be an option inthe context of Brazilian small and mid-size companies, butit is an alternative in dealing with Brazilian companiesissuing notes abroad under Article 144A / Regulation Srules. This is because such companies are bound tocorporate governance and accountability standards andcreditors may have a better understanding of theproblems that resulted in an insolvency situation. As such,not only financial institutions but also internationalbondholders have been pursuing such alternative as anoption to avoid the pitfalls of in-court restructuring.

Historically court restructurings tend to result in poorrecovery because of the deterioration of the operations ofthe debtor. The fact that creditors cannot proposereorganization plans concurrently with the debtorincreases debtor leverage in the process. In addition, in-court reorganizations involve costs relating to the judicialadministrator whose role has not been balanced bycreditor’s committee. As such, in many instances, the roleof judicial administrators is carried out in a sub-standardfashion with a total lack of regard to creditors’ interests,particularly in those jurisdictions with non-specializedbankruptcy courts which are available only in major citycapitals. The creation of creditors’ committees would beuseful to bring some balance to the authority of the judicial

administrator but such an alternative has beendisregarded in all major cases in Brazil for lack of properunderstanding of the possibilities and the absence ofcreditor activism. A creditors’ committee under Brazilianlaw enjoys much broader prerogatives than those availableto ad-hoc creditors’ committees.

These conditions appear to motivate debtors to resort to in-court solutions as opposed to a negotiatedagreement with creditors. In the case of OAS – one of themost high profile cases in Brazil to date - the companyfiled for bankruptcy protection after an attemptedcorporate restructuring intended to consolidate allcreditors of different companies to the detriment ofinternational creditors. Moreover, OAS requested approvalof a controversial DIP financing collateralized by its most valuable asset (shares of the São Paulo airportoperator) without proper information being given on theneed for and allocation of funds. Nevertheless, the request received a favorable opinion from the judicialadministrator. So far, nevertheless, a creditors’ committeehas not been put together by creditors.

One more reason to justify an out-of-court approach by creditors is the absence of financing for companiesfiling for bankruptcy protection which results in thedeterioration of operational capacity and the impairmentof a proper turnaround. The only alternative in such cases turns out to be an asset sale or a mere balance-sheet restructuring. Brazil has got a reasonable trackrecord in such types of “turnaround”. Sales of assets have

TIME™ALCRITIC THE T THINKING A ATALCRITIC

tructuring firmseradings leorld’WWorld’

omconsulting.ftic.www

e visit:as ple,ssbusineour an help yonsulting cFTI C

w ormation on hoe infor morF

.sabilitieapal cechnictegic and attreptional scxe eequirs that rsignmentas

x ompleaking on challenging and cor tation feputhas a re citcarpehT.sevicery servoece ratorporound and cturnar

tructuring,seed situations including rssetro disspect terf support with s the full spectrum ovideoonsulting prFTI C

f egment otructuring ssee/Re FinancatorporThe C


traditionally occurred in sectors facing deep crisis and thus affect strategic investors and the pricing ofthe asset. In addition, the legal requirements of anacquisition tend to keep strategic purchasers away. As such, many cases initially greeted as astoundingsuccesses in practical terms have resulted in thedismantling of the debtor’s operations and a poor credit recovery. This is the case of Parmalat Holding,Agrenco and Margen, which are all bankrupt. It is also the case in relation to Independência, Arantes andFrialto, which all ceased to operate following asset sales. In other words, these were also disguisedliquidation procedures under the control of a judicialadministrator and the judicial branch where creditorsplayed secondary roles.

These circumstances should also raise questions aboutthe advantages granted by Brazilian law to fiduciarycreditors, i.e., secured creditors. The deterioration ofoperational capacity of the debtor tends negatively toimpact the value of the assets subject to the security orlease. Moreover, the outstanding unsatisfied portion of thecredit will either be treated as an unsecured credit andpaid according to the conditions set forth in the approvedrestructuring plan for such class of credits (in the case ofa lease agreement) or be deemed extinguished even ifonly partially paid (in the case of a security interest). As totrade finance credits (known as ACC), the privilegegranted by Brazilian law will not be effective until theexportation is made. (so that the priority granted by law totrade finance credits is not effective if the Brazilianborrower/exporter does not actually export the products).The same applies to receivables if operations areinterrupted (since if a debtor interrupts operationsreceivables given as collateral will not materialize).

Brazilian experiences all show that cases conducted in theform of a court restructuring could have been conducted

out of court with better results. This is true in the cases ofCelpa and Rede Energética. In both situations, controllingshareholders sold their equity interest to third parties. Thesame applies to Infinity Bio Energy (also sold to thirdparties) and to OGX where creditors agreed to a debt intoequity conversion. In none of these cases did the benefitsthat might have justified a court restructuring materialize.In all these cases there were no asset sales and allfinancing was provided by the grant of security over theassets thus prevailing vis a vis post-petition credits.Moreover, significant fees were due incurred to the judicialadministrator in all such cases.

Accordingly, a change in creditors’ strategy towardsdebtors does not come as a surprise. Nevertheless, in therecent cases discussed below, all involving internationalcreditors, bondholders have had to bear major lossesmostly because of a lack of appropriate security or nosecurity at all while Brazilian and international banks havebeen structuring their financing packages to reduce theirexposure to a bankruptcy protection filing by creating asecurity interest over the main assets of borrowers.

In January 2015 GVO, a sugar cane and ethanol producer,missed a coupon interest payment relating to securednotes of USD135m, senior secured notes due 2020 andalso to senior secured notes of USD300m due 2019, allissued by Luxembourg-based Virgolino de OliveiraFinance Limited. The company had also issued USD300munsecured notes due 2022. Since then, the company hasbeen struggling because of a lack of working capital tofinance its crop and recently it had to sell certain assets forfunding the 2015/16 crop. Negotiations have beendragging on since the default indicating a lack ofalternatives for bondholders.

In May 2015 Tonon Bioenergia missed a coupon paymentof USD12m in connection with an issuance of secured


Local expertise. International reputation.

Leading offshore law firm Mourant Ozannes advises on the laws of the BVI, Cayman Islands, Guernsey and Jersey.

We have the largest litigation and insolvency practice across the Channel Islands and Caribbean and advise on all aspects of complex insolvency related litigation and corporate restructurings, providing pragmatic and workable solutions for our clients.

For more information contact

Channel Islands Jeremy Wessels on +44 1481 739 303, [email protected]

Caribbean Simon Dickson on +1 345 814 9110, [email protected]

mourantozannes.com

BVI | CAYMAN ISLANDS | GUERNSEY | HONG KONG | JERSEY | LONDON

bonds in the amount of USD 230M due 2024. Despite adefault with secured bondholders in July 7, 2015 thecompany announced the completion of an exchange offerrelating to 96.45% of an outstanding USD300m unsecurednotes due 2020 and for unsecured notes due also 2020,but with lower interest rates. In addition, some unsecuredcreditors provided an additional USD70m in new moneyfor working capital though collateralized by certain assets.The case illustrates the lack of alternatives for unsecuredcreditors in a scenario of depressed prices for the ethanolindustry. Following the default on the coupon payment dueto secured bondholders, unsecured bondholders wereforced into the exchange offer.

In May 2015 Ceagro Agricola, a trading company dealing with soybeans and corn, missed a USD5.5mcoupon payment due in connection with an issuance ofUSD100m senior notes due 2016. Bondholders had a lienon a collection account and a security interest on thequotas of Ceagro. While the value of a security interest onthe equity of a distressed asset is debatable, the collectionaccounts were empty by the time of the default. Themajority of the company’s total indebtedness ofapproximately USD 225m was arranged with Brazilianbanks in the form of trade finance transactions (known asACC) which are not affected in the event of a bankruptcyprotection filing. However, because the security accountswere emptied, creditors may be constrained to provideadditional financing to keep the company operating as theonly recovering alternative. An attempt to negotiate astandstill with major creditors failed, among other reasons,

for it failed to release the 2014 financial statements. Thecase indicates a combination of improper collateralstructuring and management impairing bondholdersability to foreclose on the receivables guarantee.

Finally, the execution of the M&A process is also a criticalpiece of this type of solution, because in the end, the effortof the parties involved is focused on preservation of valueto sell at the best price and solve the problem of overleverage. However, in a depressed macroeconomicenvironment an asset sale might not be possible in the shortterm. Therefore, the M&A solution requires an enormousfocus in its execution and great flexibility on the part of all:the shareholders in relation to the various solutionspresented by the advisors; and creditors because thechances of getting low bids, in a scenario of economicdepression, is much more than a mere probability.

However, while restructuring solutions focusing ondivestments would not be favorable to the Brazilianeconomic climate because of depressed prices and stillunpredictable future scenario, it could represent anopportunity for international investors. In fact, in Brazil wesee today plenty of very cheap assets due to the crisesitself and the deep currency devaluation.

We are convinced that in sectors such as agribusiness, oiland gas, infrastructure and civil construction for example,extra judicial reorganization would be the solution forinternational financial or strategic investors to look at thebeautiful opportunities emerging throughout Brazil.


A year ago, the future of the group of entities collectivelyreferred to as “Baha Mar” looked bright. Baha Mar owns a3.3 million square foot resort complex located in CableBeach, Nassau, The Bahamas (the “Project”), thedevelopment of which is funded by The Export-ImportBank of China (“CEXIM”). If and when finished, the Projectwill include four new hotels, a Las Vegas-style casino, aconvention center, and an 18-hole golf course, and will beone of The Bahamas’ largest employers.2

Trouble struck the Project in March of 2015, however, whenits general contractor, CCA Bahamas, Ltd. (“CCA”) — aunit of the Chinese government-owned China State Construction Engineering Corp. Ltd. (“CSCES”) —failed to finish construction by the pledged deadline (who was to blame for this failure would prove to be justone of the hotly-contested issues among Baha Mar, itsChinese backers, and the Bahamian government).Although the Project was then estimated to be 97%complete, Baha Mar, lacking both a definitive constructioncompletion date and any meaningful revenue generation,encountered a severe liquidity crisis. On June 29, 2015,Baha Mar and its affiliates simultaneously filed Chapter 11cases in the United States Bankruptcy Court for the Districtof Delaware (Carey, J) and sought from the Supreme Court of the Commonwealth of The Bahamas bothrecognition of the United States proceedings and an extension of the automatic stay triggered upon theChapter 11 filing to Bahamian legal proceedings involvingBaha Mar.3

Each of the Bahamian government, CEXIM, and CCA(among others) vehemently opposed recognition. Thegovernment claimed that recognition would harm thefinancial reputation of The Bahamas, already allegedly

facing a credit downgrade from S&P as a result ofthe ongoing problems with the Project. For theirpart, CEXIM, and CCA argued that recognitionand the grant of the requested stay would beagainst public policy in The Bahamas. On July 22,2015, the Bahamian Supreme Court issued anoral ruling denying recognition of the USproceedings, reasoning that none of Baha Mar’sstakeholders — including its employees,creditors, CSCES, and CEXIM — could haveanticipated that US insolvency laws would govern

in the event of Baha Mar’s insolvency.4

The Bahamian government’s formal hostility to Baha Mar’sChapter 11 proceedings did not end at its objection torecognition. On July 16, 2015, in stark contrast to BahaMar’s stated intention to reorganize pursuant to a Chapter11 plan, the government petitioned the BahamianSupreme Court to order the winding up (i.e., theliquidation) of the Bahamian Baha Mar entities’ businessand to appoint provisional liquidators for those entities. Thelatter request was granted weeks later, when the Bahamiancourt issued a ruling appointing joint provisionalliquidators — AlixPartners and KRyS Global — for seven ofthe Baha Mar entities.5 The orders, however, constrainedthe powers of the liquidators to those necessary topreserve Baha Mar’s assets pending a hearing on the wind-up petition.6 Baha Mar quickly issued a press release celebrating the orders,stating that severe restrictions on liquidators’ powersindicated that, notwithstanding its earlier denial ofrecognition to the Chapter 11 cases, the Bahamian courtwas now willing to allow Baha Mar to proceed in the USwith a Chapter 11 plan of reorganization if the US court soallowed.7 Although Baha Mar’s reading of the Bahamiancourt’s orders was not unreasonable, its optimism wouldsuffer a severe check just weeks later in the Chapter 11cases.

While the Bahamian Supreme Court was considering theprovisional liquidators’ appointment, the parties continuedto battle in Delaware, with CCA and CEXIM each seekingto dismiss the Chapter 11 cases (arguing among otherthings that the cases were filed in bad faith to allow BahaMar to maintain control over the Project, rather than submitto a Bahamian liquidation) and hotly resisting Baha Mar’sattempts to take depositions and obtain discovery related

Baha Mar, Cross-Border Conflict or Cooperation: Provisional Liquidators Appointed in The Bahamas as United States Chapter 11 Proceedings Are Dismissed

By David J. Molton*Fellow, INSOL International

Brown Rudnick LLPNew York, USA

andKiersten A. Taylor1Brown Rudnick LLPBoston, USA

* David Molton is a partner at Brown Rudnick LLP and a co-chair of the firm’s International Disputes Practice Group, based in the firm’s New York office. He is also a Fellow of INSOL International. Kiersten Taylor is an associate in Brown Rudnick LLP’s Bankruptcy and Corporate Restructuring Group, based in the firm’s Boston office.

1 See Declaration of Thomas M. Dunlap in Support of Chapter 11 Petitions and First Day Pleadings of Northshore Mainland Services Inc. and its Affiliated Debtors and Debtors in Possession, In re Northshore Mainland Servs., Case No. 15-11402 (Bankr. D. Del. June 29, 2015).2 The Chapter 11 cases were consolidated under the caption In re Northshore Mainland Servs., Case No. 15-11402 (Bankr. D. Del.) (KJC).3 In re Northshore Mainland Servs. Inc. [2015] COM/Com/00039 (Bah. Sup.Ct. July 31, 2015), at ¶ 58. Baha Mar is currently appealing the Bahamian court’s ruling.4 Status Report Regarding Bahamian Proceedings, In re Northshore Mainland Servs., Case No. 15-11402 (Bankr. D. Del. Sept. 10, 2015).5 Id.6 Baha Mar Comments On Bahamian Supreme Court Ruling (Sept. 4, 2015), available at http://www.prnewswire.com/news-releases/baha-mar- comments-on-bahamian-supreme-court-ruling-300138441.html7 See Letter to Carey, J. From Counsel to CCA Bahamas, Ltd., In re Northshore Mainland Servs., Inc., Case No. 15-11402, (Bankr. D. Del. Aug. 6, 2015)


to the Project, and Baha Mar, in turn, accusing theBahamian government, CCA and CEXIM of engaging in anunspecified conspiracy against Baha Mar.8

On September 15, 2015, Judge Carey dismissed theChapter 11 cases of all but the sole US-incorporated BahaMar entity. Rejecting CCA and CEXIM’s “bad faith”argument, Judge Carey instead found that dismissal wouldbest serve the interests of Baha Mar’s creditors, agreeingwith the Bahamian Supreme Court that the stakeholders inthe Bahamas-incorporated debtors could not haveexpected that the Project’s main insolvency proceedingwould take place in the United States.9

Importantly, Judge Carey also found that it was proper forhim to abstain in favor of the Bahamian proceedings underprinciples of comity.10 Judge Carey’s decision to defer tothose proceedings was plainly influenced not only bygeneral principles of cooperation between courts, but bythe fractious relationship among the parties, which wassure to result in contentious, cross-border, multi-forumlitigation in two plenary insolvency proceedings if theChapter 11 cases were allowed to proceed in tandem withthe Bahamian liquidation proceeding. Indeed, JudgeCarey explicitly noted that he may have decided againstdismissal (leaving Baha Mar free to continue prosecuting

a reorganizing Chapter 11 plan in the US) if he believedthat decision would have brought CCA,CEXIM and theBahamian government “back to the bargaining table” (tonegotiate a resolution that would have resolved both of thepending insolvency proceedings) — however, under thecircumstances, he perceived “no greater good to beaccomplished” by exercising jurisdiction over the cases.10

Simply put, the US Bankruptcy Court employed itsdiscretion not to exercise jurisdiction and abstain in favorof the Bahamian proceeding (where Baha Mar’s center ofmain interest indisputably was sited) when it concludedthat proceeding with the US case would, under the presentcircumstances, only result in a free-fall Chapter 11 caseand provide no immediate benefit to all the stakeholders.What started out as an apparent conflict between the twocourts in effect became cooperation.

Negotiations are said to be ongoing between Baha Mar’sexecutives, the Bahamian government, CSCES and CEXIMregarding if and when the Project will fully open. Hearingon the Bahamian government’s petition for orders directingthe liquidation of Baha Mar’s business is scheduled forNovember 2, 2015 before the Bahamian Supreme Court. Inthe meantime, international insolvency observers — to saynothing of Baha Mar’s 2,400 staff members — continue toawait a resolution.

8 Memorandum Regarding Motions to Dismiss Cases, In re Northshore Mainland Servs., Inc., Case No. 15-11402 (Bankr. D. Del. Sept. 15, 2015), at 21-22.9 Id. at 23.10 Id.at 21-22.

24th – 26th January 2016Madinat Jumeirah, Al Sufouh Road, Dubai, United Arab Emirates

INSOL Dubai

Final booking deadline 15 December 2015We are delighted to announce that by the early booking deadline we had over 400 registrations to attend INSOLDubai our Annual conference representing the Europe, Africa, Middle East region. We have a limited number ofdelegate places at the conference so we do advise not to wait until the last minute to make your booking.

The Main Organising Committee are in the final stages of preparation for what will be an exciting technicalprogramme with many different presentation styles and opportunities for interaction with the speakers anddelegates.

We are delighted to announce that our keynote speaker is Mrs. Al-Ghunaim who is the Vice Chairman and GroupChief Executive Officer of Global Investment House. She Co-founded Global in 1998 and has been managing thecompany since then to become a prominent asset management and investment banking firm in the region.

Mrs. Al-Ghunaim was involved in several milestone transactions including one of the largest M & A transactions inthe telecommunications sector for USD10.7bn, the raising of USD10bn in equity capital, and USD3bn inconventional & Islamic debt, and the management of USD4bn on behalf of clients, she has over 31 years ofexperience in the financial sector mainly in asset management and investment banking.

She has been recognized as a role model for Arab women and women in the Islamic world. She has receivedseveral accolades from industry leaders including the “Banker Middle East Industry Award” (BME) for heroutstanding contribution to the financial industry. The Wall Street Journal has named her on its list of 50 “Womento Watch”. Forbes (US) ranked her for three consecutive years as one of the World’s 100 most influential women.We look forward to welcoming Mrs. Al-Ghunaim to our conference and hearing her insight into the region in herkeynote address.

The technical programme will include a vibrant mix of topics with speakers from around the world including ourimmediate Past President James H.M. Sprayregen, Kirkland & Ellis LLP; Patrick Ang, Raja & Tann Asia, Eric Lalo,Lazard Ltd, Anke Heydenreich, Attestor Capital LLP and Glen Davis QC, South Square to name just a few ofthose taking part in the technical programme covering subjects such as “What next for Middle Easternrestructuring and what role will Islamic financing play?; View from the Islands: how does common law comparewith statutory principles? and Directors duties revisited; fight or flight.

Our conference will give our members the opportunity to meet new members in this dynamic region through ourgrowing network and learn more about our work in the region. It will also be a superb opportunity to meet up withold friends as well as hearing about all the latest cross-border developments that have taken place since INSOLSan Francisco.

It promises to be a very interesting programme where we will be using interactive voting methods and providingan updated improved App for the conference so all this combined with the venue of Dubai it is a conference not to be missed.

We still have a number of sponsorship opportunities available and if you would like further information pleasecontact Claire Broughton, Executive Director, INSOL International on [email protected]

WelcomeDinnerSponsor:

MondayLunchSponsor:

MondayBreakfastSponsor:

CorporateSponsor:

Tuesday Lunch Sponsor:

Coffee Breaks Sponsor:

We would like to thank our sponsors:


Cross-Border Insolvency Proceeding.The Devil is in the Details: Legal Requirements for Incorporating Documents in Latin America

In the matter of cross-border insolvency proceedingsinvolving Latin America jurisdictions, in which the assets andaffairs of the debtor are subject to control and supervisionby a foreign court for the purpose of reorganization orliquidation, foreign representatives and their counsel facethe challenge of two or more different converging legalsystems, which in turn involve two or more different legalcultures as well.

Providing quality service to our international clients in thearea of insolvency and asset recovery in the region of LatinAmerica has involved channeling letters rogatory betweenjudicial authorities, authorizing and registering Powers ofAttorney, and enforcing judgments such as requests forcollaboration or recognition of foreign proceedings. Incertain cases, certain evidentiary means such as expertreports on foreign law, witness testimony, and accountingcertifications have also been gathered in compliance withstrict legal requirements that vary among jurisdictions.

Despite the fact that many local and international effortshave been made in order to improve the efficiency ofproceedings involving two or more jurisdictions, achievestandardization and efforts to create consistent case lawand legislation, there are still situations, that may seemminor to practitioners, that create legal barriers andobstacles to Administrators/Receivers and Liquidators in theperformance of their duties.

In Latin America, one difficulty arises from the need tocomply with certain formalities in order to give effect to andincorporate legal documents from certain jurisdictions. It isa general rule applicable to civil law jurisdictions thatdocuments originating abroad, especially in cases wherethese are produced in different languages, have to be“legally” incorporated if they need to be registered locally orused by local counsel. In the case of Guatemala forexample, for documents originating abroad that are

intended to have effects in thecountry, the Foreign AffairsMinistry must legalize them. Ifthe documents are in a foreignlanguage, these must betranslated into Spanish by aqualified translator in thecountry; in cases where atranslator is not available for acertain language, these will betranslated under a sworndeclaration by two persons

that speak and write both the foreign language andSpanish, and whose signature will be legalized by a notary.In addition to these requirements, powers of attorney anddocuments intended to be publicly registered must beinserted to a notarial protocol, and the correspondingauthorities will act upon copy of such deeds.

Additionally, Guatemala law states that when Guatemalantribunals are to apply foreign law, the party invoking suchlaw, or the party objecting to their application, must justify itstext, date of enforcement and nature, by means of acertification from two qualified attorneys in the country ofthe foreign law and legislation in question, certification thatmust be legalized in order to be filed. Without prejudice tothis, a national tribunal may question these facts, on its owninitiative or by means of a request, by diplomatic means orothers recognized by international law.

Guatemalan civil procedural law also states that documentsissued abroad may produce effects in Guatemala, only if: 1)all local requirements are met, or the documents have beenissued before diplomatic or consular authorities; and 2) theacts or contracts are not contrary to Guatemalan law. In fact,one of the specific criteria for enforcing a foreign judgmentin Guatemala is that it meets all necessary requirements forit to be considered authentic.

As will thus be clear, from the Latin America perspective,notaries or public notaries as they are also known, mayassume an important role, critical to the incorporation ofdocuments pertaining to a cross-border proceeding, suchas commonly required powers of attorney, accountingcertifications, and foreign judgments. This shows a contrastbetween civil-law tradition and common-law tradition.

By comparing their roles, we see that notaries in commonlaw jurisdictions main role is to authenticate signatures,affidavits and the preparation of wills. Civil law notaries,many also qualified as attorneys, are however empowered

By Rodrigo Callejas,Fellow, INSOL International

Fabian Zetinaand Emanuel Callejas Carrillo y AsociadosGuatemala

to witness acts and circumstances in their presence, andauthorize contracts, locally and abroad, which are requiredto create effects locally. Common actions include acting aswitnesses, authorizing deeds, and authenticating signaturesand copies of original documents.

Complementary to the involvement of notaries in legalizingdocuments the Convention Abolishing the Requirement ofLegalization for Foreign Documents was concluded on 5October 1961. The Convention applies to public documentsexecuted in one territory that have to be produced inanother. States party to the Convention are required only tocomply with the formality of a certificate (commonly referredto as the “apostille”) placed on the document in the form ofa model there provided, and issued at the request of theperson who has signed the document or of any bearer. TheConvention seeks to accelerate the incorporation of foreignpublic documents by establishing an internationalcertification comparable to a notarization or legalization indomestic law. According to the Hague Conference onPrivate International Law as of September 2015, there are108 contracting states who are parties to this Convention1.In the case of Guatemala, a non-signatory party, theincorporation of a foreign document may take up to 10-15business days, depending on the origin of the document,which increases the expense involved and creates delays.

In addition to the role of notaries and the process oflegalization of documents through the various routes thatmay be applicable, one last hurdle is to be met prior to

authenticating documents locally, namely legal translation tolocal language. This process also involves time and costs toconsider, as well as confidentiality assurances on theprocedure and sharing of documents to a third-party.

Experience has shown our team that our international clientsrequire a clear step-by-step guide when coming to LatinAmerican jurisdictions as regards the completion andpreparation of necessary documents to achieve their goals.Once documents comply with said “international”requirements, a local handling and follow up with institutionson the final steps for authentication are needed. Most publicoffices have specialized departments handling internationalmatters, we have had experience dealing with the Ministryof Foreign Affairs, the Registry of Powers, the GeneralMercantile Registry, the Supreme Court of Justice and thePublic Ministry.

Foreign representatives and their counsel are required to beaware of these details. Even if they appear to be onlyadministrative details they can cause significant timeconsiderations and expenses to foreign proceedings. Theseare just a few examples that show how apparently minorlegal barriers can have a legal, economic and operationaleffect on the enforcement of legal proceedings in LatinAmerica. The conclusion is that foreign representatives andtheir counsel need to be aware of these compliance issues,and on a macro level, more efforts need to be made both inthe local and international arena in order to simply theprocesses involved and reduce costs.


1 http://www.hcch.net/index_en.php

INSOL INTERNATIONAL

RRIICCHHAARRDD TTUURRTTOONN AAWWAARRDD,, 22001155Richard Turton had a unique role in the formation and managementof INSOL Europe, INSOL International, The Insolvency PractitionersAssociation and R3, the Association of Business RecoveryProfessionals in the UK. In recognition of his achievements the fourorganisations jointly created an award in his memory. The RichardTurton Award is an annual award providing an educationalopportunity for a qualifying participant to attend the annual INSOLEurope Conference and have a technical paper published.

In recognition of those aspects in which Richard had a specialinterest, the award for 2015 was open to applicants who fulfilled allof the following:

• Work in and are a national of a developing or emerging nation;

• Work in or be actively studying insolvency law & practice;

• Be under 35 years of age at the date of the application;

• Have sufficient command of spoken English to benefit from theconference technical programme.

Applications for the award were invited to write a statement detailingwhy they should be chosen in less than 200 words. A panelrepresenting the four associations adjudicated the applications. The panel members are as follows: Stephen Adamson – INSOLEurope, Neil Cooper – INSOL International, Patricia Godfrey – R3and Maurice Moses – IPA. The committee received outstandingapplications for this year’s award and it was a very close run

decision. We are delighted that the award has attracted suchenthusiasm and response from the younger members of theprofession and know that Richard would also be extremely pleased that there had been such interest.

The Committee is delighted to announcethat the winner is Waiswa Abudu Sallamfrom Uganda. Waiswa works for the UgandaRevenue Authority in the Debt CollectionDepartment. He is currently studying for aMaster of Laws in Corporate and InsolvencyLaw at Nottingham Trent University, UK (bydistance learning). This is the first time wehave had a winner from Uganda. Previouswinners have come from Belaruse, India,Latvia, Lithuania, Poland, PRC, Romania,Russia and Serbia.

As part of the award, Waiswa was invited to attend the INSOL Europe Conference which was held on the 1-4 October in Berlin, Germany. He will be writing a paper that will be published in summary in one or more of the Member Associations’ journalsand in full on their websites. We would like to congratulate Waiswafor his excellent application and also thank all the candidates who applied for the award this year. There were many excellentsubmissions and the judges task was very difficult this year.

Sponsored by:


Primeo v Herald – More Certainty for Unpaid Redeemers

The recent decision of the Grand Court of the CaymanIslands in the case of Primeo Fund (in Official Liquidation) vMichael Pearson as an Additional Liquidator of Herald FundSPC (in Official Liquidation) has brought some welcomeclarity as to how liquidators will treat the claims of redeemed,but unpaid former shareholders of Cayman companies(Unpaid Redeemers).

Until now, it had not been clear whether Unpaid Redeemerswould rank as creditors and therefore be paid in full beforeany monies are distributed to unredeemed shareholders, orwhether, in certain circumstances, they would fall to be paidpari passu with unredeemed shareholders.

Other offshore jurisdictions have grappled with the samequestion in the relatively recent past. For example, in the2013 BVI case of Somers v Monarch Pointe, the BVI HighCourt analysed the operative sections of the Insolvency Act2003 and held that the claims of Unpaid Redeemers shouldrank alongside the claims of unredeemed shareholders. TheEastern Caribbean Court of Appeal disagreed, holding thatUnpaid Redeemers were, in fact, deferred creditors and assuch entitled to have their claims against the companysatisfied in priority to any claims by unredeemedshareholders.

In the Cayman Islands, the question is also governed bystatue, namely section 37(7) of the Companies Law. Theoperative parts of this statute (which are very different fromtheir BVI counterparts) are:

• section 37(7)(a), which states:

where a company is being wound up and, at thecommencement of the winding up, any of its shareswhich are or are liable to be redeemed have not beenredeemed… the terms of redemption… may be enforcedagainst the company.; and

• subjections (i) and (ii) which contain carve-outs from thisenforceable right, including if the company was insolventbetween the period on which the redemption was to havetaken place and the date of winding up; and

These sections were first enacted in 1987 and have notchanged materially since then. They were based on (nowrepealed) equivalent sections of the English CompaniesActs 1981 and 1985. As a consequence, they were drafted

well before the Privy Council clarified precisely at what stagea redemption would be completed, which it did in the 2010case of Culross v Strategic Turnaround.

In Strategic Turnaround, both the Cayman Grand Court andCourt of Appeal had held that a redeeming shareholderremains a member of a company until he has receivedpayment for his shares and his name has been removedfrom the company’s register of members.

The Privy Council disagreed, concluding that the issuedepended entirely upon the construction of the individualcompany’s Articles, and that it was not to be approached onthe basis of any a priori view that, until payment of theredemption proceeds, a shareholder must or shouldnecessarily remain a member of a company… For thecompany in question, the Privy Council determined that theredemption had taken place on the Redemption Date, withthe remittance of redemption proceeds being treated as amatter of supplementary procedure.

Similarly, in Herald it was common ground between theparties that the relevant redemptions had taken place beforethe commencement of the company’s winding up. On thatbasis, the Grand Court held that because the shares inquestion had been redeemed, the claims fell outside section 37(7), which only applied to shares which have notbeen redeemed.

As a result of this decision, it is now clear that the claims of Unpaid Redeemers fall outside section 37(7). Therefore,they will always be paid in priority to any claims byunredeemed shareholders, even if the company wasinsolvent when the redemptions took place and, therefore,the claims could not have lawfully been paid prior to thecompany’s liquidation.

Unredeemed shareholders may well feel that such anapproach is harsh and that it unfairly relegates their interestbehind that of any Unpaid Redeemers. However, therationale for the approach is investor certainty, and thebenefit all investors have from knowing in advance that their contractual bargain will be given effect by the Courts. Inthat respect, the decision in Herald builds on the previous decisions of the Privy Council in StrategicTurnaround and Fairfield, which have stressed thedesirability of certainty and giving effect to a fund’sconstitutional documentations.

The decision also considered the circumstances in whichliquidators can rectify a company’s register of members inthe event of fraud. This is an issue that the Grand Court willconsider in more detail on a subsequent occasion. However,one noteworthy part of this decision was that the GrandCourt stated that the power to rectify would only apply tothose recorded as shareholders as at the commencement ofthe liquidation. Therefore, unless they still held other shares,the power would not affect Unpaid Redeemers, as by thecommencement of the liquidation they had already becomecreditors and were no longer shareholders.

This decision is subject to appeal.

By Nicholas FoxFellow, INSOL International

Mourant OzannesTortola, BVI


IntroductionThe Supreme Court of New South Wales in In ReBluenergy Group Limited (Subject to DOCA)(Administrator Appointed) [2015] NSWSC 977 (In ReBluenergy) recently had cause to consider whether asecured creditor who did not vote in favour of a proposalfor a deed of company arrangement (DOCA), was able torely on its security to appoint administrators to thecompany after the DOCA had been executed.

Background In September 2013, Keybridge Capital Limited(Keybridge) advanced $300,000 to Bluenergy GroupLimited (Bluenergy) and took a charge over its assets.

In April 2014, Bluenergy was placed into administration.

In July 2014, Bluenergy’s creditors voted to adopt a DOCAproposal and in August 2014 the DOCA was dulyexecuted. Keybridge did not vote in favour of the DOCA,preferring to abstain.

In March 2015 while Bluenergy was still subject to theDOCA, Keybridge appointed an administrator toBluenergy pursuant to section 436C of the CorporationsAct 2001 (Cth) (Corporations Act).

The deed administrators of the DOCA challenged theappointment of the administrator on several grounds. Oneargument advanced was that the DOCA had extinguishedKeybridge’s secured debt and consequently Keybridgewas unable to rely on section 436C of the CorporationsAct to appoint an administrator to Bluenergy.

Keybridge contested the assertion that its secured debthad been extinguished by the DOCA, relying on section444D(2) of the Corporations Act which provides that aDOCA does not prevent a secured creditor from realisingor otherwise dealing with its security interest, unless thesecured creditor has voted in favour of the DOCA or thecourt otherwise orders.

The decisionJustice Black held that section 444D(2) of theCorporations Act operated to preserve Keybridge’s right torealise or otherwise deal with its security interest in thesecured property.

However His Honour found that the section did not preserve Keybridge’s secured debt, whichhad been extinguished by the DOCA. This meantthat after execution of the DOCA Keybridge wasno longer a creditor of Bluenergy irrespective ofthe fact that Keybridge had not voted in favour ofthe DOCA.

In reaching this conclusion, His Honour drew adistinction between: (a) Keybridge’s personalrights (that is, the debt owed by Bluenergy) whichwere extinguished by the DOCA; and (b)

Keybridge’s proprietary rights (that is, its interest inBluenergy’s property pursuant to its charge) which werenot extinguished by the DOCA.

Importantly, Justice Black’s decision finding was made inrelation to a current secured debt – it was not limited to thefuture or contingent debts of a company subject to aDOCA as was the case in Australian Gypsum IndustriesPty Ltd v Dalesun Holdings Pty Ltd [2015] WASCA 95(Australian Gypsum)1.

His Honour rejected submissions made on behalf ofKeybridge that it was meaningless to preserve Keybridge’sproprietary interest if there was no underlying debt torecover, and that there could sensibly be no “securityinterest” (as defined by the Corporations Act) if there wasno associated debt in existence.

Justice Black’s decision was guided, at least in part, bythe majority’s judgment in Australian Gypsum, togetherwith considerations of the “practical difficulties” which HisHonour considered would arise if secured debts survivedthe execution of a DOCA. Justice Black was concerned toensure that companies coming out of voluntaryadministration have a “fresh start” unburdened by debts(either unsecured or secured). This is an outcome whichHis Honour considered was consistent with the generalpolicy of Part 5.3A of the Corporations Act.

Interestingly, His Honour concluded that notwithstandingthat Keybridge was no longer a creditor of Bluenergy,section 444D(2) of the Corporations Act meant that itretained the right to appoint an administrator to Bluenergypursuant to section 436C of the Corporations Act.However, His Honour was persuaded to terminate theadministration under section 447A of the Corporations Actbecause, among other things, there was no utility in itwhere Keybridge’s debt had been extinguished.

ImplicationsSince the introduction of Part 5.3A of the Corporations Act almost 25 years ago, it has been accepted thatsecured creditors, subject to their express contraryagreement, stood outside the DOCA process. JusticeBlack’s decision, together with that of the WesternAustralian Court of Appeal in Australian Gypsum,fundamentally alters this position.

DOCA Held to Extinguish Secured Debts

By Larissa Strk and Gavin Rakoczy King & Wood Mallesons Perth, Australia

1 In Australian Gypsum, a majority of the Court of Appeal held that section 444D(2) of the Corporations Act did not prevent the extinguishment by a DOCA of future and contingent secured claims.


If correctly decided, In Re Bluenergy and AustralianGypsum mean that for the first time secured creditors willhave been brought squarely within the ambit of a DOCAand their secured debts will be subject to extinguishmentin the same way as applies to the debts of ordinaryunsecured creditors. The only right preserved will be thesecured creditor’s ability to, in effect, enforce its securityand then only in relation to secured debts which hadcrystallised as at the “relevant date” (usually the date ofappointment of administrators).

Policy considerations, in particular the rehabilitative policyunderlying Part 5.3A of the Corporations Act, seemed toweigh heavily on Justice Black and the Western AustralianCourt of Appeal, warranting interference in the rights ofthe secured creditor. However, we respectfully note thatPart 5.3A has been operating effectively for close to 25years on the basis that it did not extinguish secured debts.

Further, there may be a number of unintendedconsequences flowing from the decision in In ReBluenergy. By restricting secured creditors (postexecution of a DOCA) to their proprietary rights, securedcreditors could possibly be deprived of rights arisingoutside the ambit of the security agreement which may notbe of a proprietary nature.

There may also be implications for property acquired afterthe relevant date. In In Re Bluenergy, Justice Black framedthe test for identifying proprietary rights which survived aDOCA by reference to the position of the secured creditoras at the relevant date. It arguably follows that if aninsolvent company acquires property after the relevantdate, the secured creditor’s proprietary interest in thatproperty will not be preserved by section 444D(2) of theCorporations Act, ie because the interest did not arise untilafter the relevant date.

Questions also arise concerning the de-coupling ofsecured debts from their accompanying securities. Thereis authority dating back to the 1800s that the release of asecured debt automatically releases the accompanyingsecurity.2 This line of authority would suggest that upon aDOCA discharging a secured creditor’s debt, there will be

an automatic discharge of the secured creditor’sassociated security. In Re Bluenergy does not address orseek to reconcile this established line of authority with theoperation of section 444D(2) of the Corporations Act. Thismay be, in part, because Counsel for both parties in In ReBluenergy proceeded on the basis that if the DOCAextinguished the secured debt, no right of enforcement bythe secured creditor was possible.3

Another issue is the interplay between the judgment ofJustice Black and the High Court of Australia’s decision inWillmott Growers Group Inc v Willmott Forests Ltd(receivers and managers appointed) (in liquidation) & Ors[2013] 304 ALR 80 (Willmott). In that case a majority of theHigh Court held that the disclaimer of a lease operated tobring to an end the tenant’s proprietary interest in the landas lessee. Fundamental to this outcome was a rejection bythe High Court of the de-coupling of contractual rightsarising under the lease from the lessee’s associatedproprietary interest in the land. This was because the HighCourt considered that the existence of the latter wasdependent on the continuing rights of the tenant arisingunder the lease. An analogy would seem to exist with theposition of a secured creditor whose ongoing rights aschargee depend on the continuing efficacy of theunderlying security agreement. Viewed this way, JusticeBlack’s judgment may sit somewhat uneasily alongside theHigh Court’s decision in Willmott.

Concluding observationsWe anticipate that as a result of the decisions in In ReBluenergy and Australian Gypsum secured creditors willbecome far more proactive in responding to DOCAproposals and potentially more interventionist in theirapproach towards voluntary administrations. This mayinclude secured creditors voting against DOCA proposalswhich do not expressly or adequately protect theirinterests, and the pre-emptive appointment of receiversand managers to realise secured assets.

We expect that the interaction of DOCAs and secureddebts will be the subject of further consideration by thecourts and may well require the High Court’s imprimatur, orlegislative intervention, before being finally resolved.

AlixPartners LLP

Allen & Overy LLP

Alvarez & Marsal

Baker & McKenzie LLP

BDO LLP

BTG Global Network

Cadwalader, Wickersham & Taft LLP

Chadbourne & Parke LLP

Clayton Utz

Cleary Gottlieb Steen & Hamilton LLP

Clifford Chance LLP

Davis Polk & Wardwell LLP

De Brauw Blackstone Westbroek

Deloitte

Dentons

DLA Piper

EY

Ferrier Hodgson

Freshfields Bruckhaus Deringer LLP

Goodmans LLP

Grant Thornton

Greenberg Traurig LLP

Hogan Lovells

Huron Consulting Group

Jones Day

Kaye Scholer LLP

King & Wood Mallesons

Kirkland & Ellis LLP

KPMG LLP

Linklaters LLP

Morgan Lewis & Bockius LLP

Norton Rose Fulbright

Pepper Hamilton LLP

Pinheiro Neto Advogados

PPB Advisory

PwC

Rajah & Tann Asia

RBS

RSM

Shearman & Sterling LLP

Skadden, Arps, Slate, Meagher & Flom LLP

South Square

Weil, Gotshal & Manges LLP

White & Case LLP

2 See for example Cowper v Green (1841) 7 M&W 633.3 See at [35]-[36].


By Van C. Durrer, II

Skadden, Arps, Slate, Meagher & Flom LLPLos Angeles, USA

As a consequence of the global financial crisis of 2008,two huge Irish financial institutions, Anglo Irish BankCorporation Limited and Irish Nationwide Building Societywere forced to liquidate in an insolvency proceeding underIrish law. The assets of those companies, measuring over€25 billion, included approximately €5 billion in the UnitedStates. In September of 2013, the Special Liquidators ofthese financial institutions sought relief under Chapter 15of the US Bankruptcy Code in order to facilitate thedisposition of the US assets. Only recently, in August of2015, did the Special Liquidators receive final recognitionof the Irish liquidation proceeding. This article examinestwo unique aspects of the Irish liquidation and how theyimpacted recognition in the US.

Background

By the end of September 2008, the collapse of the shareprice of Anglo Irish was so severe that its very survival wasin jeopardy. INBS was in no better condition, and the Irishgovernment was forced to intervene. Specifically, the Irishgovernment (a) issued a blanket guarantee for theliabilities of both companies, (b) provided funding torecapitalize the companies, and (c) issued promissorynotes to both, which they could then pledge in order toobtain additional emergency financing from the CentralBank of Ireland. Unfortunately, none of these measureswere sufficient to stabilize the Irish financial market. ByJanuary 2009, the Irish government determined that theonly solution was to nationalize Anglo Irish, which wasaccomplished by statute. The Irish government laternationalized INBS in 2010.

In 2010 the Irish government passed the CreditStabilisation Act, and on July 1, 2011 Irish Bank ResolutionCorp., a state-owned banking entity, was created. IBRCwas specifically created as a successor to Anglo Irish andINBS, and the companies were later both merged intoIBRC. It subsequently became clear that the exposure ofthe Irish government to the liabilities of IBRC was fargreater than anyone had anticipated, and as the severeeffects of the 2008 global financial crisis continued toripple through the Irish economy, the Irish governmentdetermined that it was necessary to wind down IBRC in order to restore the financial position of the state and re-establish Ireland’s access to the international debtmarkets.

Accordingly, on February 7, 2013, the Irish Parliamentpassed the Irish Bank Resolution Corporation Act of 2013which was signed into law immediately thereafter. OnFebruary 7, 2013, pursuant to the authority granted underthe IBRC Act, the Irish Minister for Finance appointed twoSpecial Liquidators to assume control of and liquidate theassets of IBRC under the IBRC Act. That appointment alsomarked the commencement of an Irish liquidationproceeding with respect to IBRC. Under the IBRC Act, theoperations of IBRC were controlled by the SpecialLiquidators, subject to the supervision of the FinanceMinister and the High Court of Ireland. Absent the IBRCAct, the Irish Companies Act of 1963 would havedetermined the liquidation of IBRC. Although the IBRC Actadopted the priority and distribution schemes set forth inthe Companies Act, the IBRC Act did make modificationspeculiar to IBRC’s liquidation, including with respect to thelevel of High Court supervision of the liquidation process.In addition, the IBRC Act expressly precluded anychallenge of IBRC’s pledge of the notes from the IrishGovernment to the Central Bank of Ireland.

“Too Big to Fail” Intersects Chapter 15: Recognition Granted to Irish Bank Resolution Corp.

INSOL World Editorial Board 2015

Co-EditorsDavid Kidd, Linklaters, Hong Kong

Nicholas Segal, Freshfields Bruckhaus Deringer, UK / Judge, Cayman Grand Court, Cayman Islands

Editorial BoardAaron Bielenberg, McKinsey & Company, UK

Mark D. Bloom, Greenberg Traurig LLP, USA

Stephen Briscoe, Briscoe Wong Ferrier Limited, Hong Kong

Juanitta Calitz, University of Johannesburg, South Africa

Fernando Hernández, Marval, O’Farrell & Mairal, Argentina

Timothy Le Cornu, Fellow, INSOL International, KRyS Global, Channel Islands

David Molton, Fellow, INSOL International, Brown Rudnick LLP, USA

Bernardino Muñiz, Hogan Lovells International LLP, Spain

Allan Nackan, Fellow, INSOL International, Farber Financial Group, Canada

Lee Pascoe, Fellow, INSOL International, Libero Legal, Australia

Bob Rajan, Alvarez & Marsal, Germany

Francisco Satiro, University of Sao Paulo, Brazil

Andrew Thorp, Harneys, BVI

Editorial comments or article suggestions should be sent to Jelena Sisko [email protected] .

For advertising opportunities and rates contact Christopher Robertson [email protected] .

www.insol.org


Ian Strang was the first president

of INSOL International and was

instrumental in creating INSOL

International, laying the

foundations of the association

that we have today.

To recognise his achievements we havecreated an award in memory of Ian. TheIan Strang Founders Award provides an

educational opportunity for a post-graduate specialising in insolvency andturnaround to attend the Annual INSOLInternational Academics Colloquium andthe annual INSOL InternationalConference (when held jointly).

The applications are now open for 2016.

• Be a postgraduate or early-career academic researcher in the field of law or accountancy specialising in insolvency & turnaround, or a recently qualified lawyer or accountant interested in the academic as well as the practical aspects of the subject.

• Provide a paper of not more than 10,000 words with regard to areas concerning cross-border issues.

• This paper should be an original piece of work, which has not previously been published in the form in which it is submitted.

The paper should be submitted by the1st September 2016. A panel ofinternational academics andprofessionals will judge the papers andmake the award by the 1st October

2016. Applicants are asked to submittheir CV along with the paper.

The successful applicant will:

• Be invited to attend the Academics Colloquium on the 18-19 March 2017, and INSOL 2017 on 19–22 March, Sydney, Australia. An allowance will be provided to cover travel and accommodation.

• Have the opportunity to present the paper at the INSOL International Academics Colloquium.

• Be recognised at the conference and receive a framed certificate of the ISFA.

• Be encouraged to submit the paper to the International Insolvency Review with a view to its publication. The paper will also be published on the INSOL website.

Please send your application to:

Ian Strang Founders Award

INSOL International, 6-7 Queen Street,

London EC4N 1SP, UK or email to Claire

Broughton at: [email protected]

Chapter 15 recognition

On August 26, 2013, the Special Liquidators of IBRC fileda petition in the US Bankruptcy Court for the District ofDelaware for recognition of the Irish liquidationproceeding in the US under Chapter 15 of the BankruptcyCode. The petition soon drew a number of objections ontwo primary grounds, among others. First, objectorsargued that the sui generis aspects of the IBRC Act andthe resulting liquidation in Ireland were motivated toprotect the Irish government and that such motivesprecluded recognition. Second, the alleged control by theFinance Minister as well as the prohibition on anychallenge of the pledge to the Central Bank of Irelandwere inconsistent with US public policy.

The IBRC Act expressly provides that one of its purposesis “restoring the financial position of the Irish State” inaddition to the more obvious purpose of winding up IBRC.In addition, insolvency statutes drafted for one specificlegal entity are, by any measure, rare. Nonetheless, the USBankruptcy Court was unpersuaded that alleged motivesunderlying the IBRC Act would serve as a bar torecognition, assuming that the required elements ofrecognition were otherwise present.

The US Bankruptcy Court therefore analyzed eachelement necessary for recognition and found that,although the IBRC Act “changed a substantial portion” ofthe Companies Act (which would ordinarily apply to the

liquidation of an Irish company), the Irish liquidationnonetheless retained characteristics sufficient to qualifyfor recognition. Specifically, the US Bankruptcy Courtfound that the Irish liquidation allowed for sufficient dueprocess and was consistent with the principles ofuniversalism and a collective, uniform process which werethe hallmarks of global insolvency process.

Likewise, the US Bankruptcy Court discounted thealleged, potential influence of the Finance Minister anddetermined that such influence did not violate US publicpolicy. In other words, the US Bankruptcy Court found thatthe IBRC Act was not in conflict with the efforts of the USCongress to contain the 2008 financial crisis. Rather, theUS Bankruptcy Court found that Ireland had deployedmany of the same techniques (treasury, rather than court,oversight and insulation of key transactions) as hadIreland such that Ireland’s fiscal policy was aligned asopposed to in conflict with US public policy.

Ultimately, in the face of one of the greatest financialcrises of all time, the US Bankruptcy Court determinedthat foreign sovereignty should be respected, universalismwas a hallmark of Chapter 15 and regulators charged withoversight should receive appropriate deference. Althoughcertain objectors appealed, the US District Court for theDistrict of Delaware determined that the decision of thelower court should be affirmed. No further appeal wastaken.


Report by Simone FitzcharlesLennox PatonBahamas

On 9 September 2015 INSOL International hosted 127guests for the Insolvency and Trusts One Day Seminar, amuch-anticipated event. This was our second seminar inthe Channel Islands held in association with our memberassociation ARITA.

The focus of the day’s sessions was on topical insolvencyand trust issues and particular instances in which tensionexists between the two areas of the law. Naturally, the eventattracted delegates from many jurisdictions including theUK, Jersey, Guernsey, the US and the Caribbean, includinga delightful blend of judges, insolvency practitioners,regulators and academics. I was pleased to encounter notonly persons working in the area of insolvency but pure trustpractitioners as well, who were equally keen to hear thediscussions on the well-chosen topics.

At the outset, the delegates and speakers were warmlywelcomed by Tim Le Cornu of KRyS Global, a Fellow ofINSOL International followed by opening remarks byAnthony Dessain of Bedell Cristin, both of whom ably co-chaired the seminar.

The first session launched into a lively discussion on‘insolvent trusts’ with an overview of the traditional Englishposition in relation to personal liability of trustees by SirAlastair Norris, Justice of the Royal Courts of Justice, UK.He explained why liability for transactions entered into onbehalf of a trust rests personally with the trustee and thatthe only means of access to a trust fund for a counterpartycreditor is the individual trustee’s right of indemnity.Justice Norris felt that it is possible for a trustee to limit hisliability to a counterparty in the original contract with thatthird party, but he advised that care should be taken indrafting such terms so as to ensure that the trustee will beable to draw upon the full value of the trust assets tosatisfy his liability. John Greenfield of Carey Olsen andAlan Binnington then discussed and compared thosestatutory provisions in Guernsey and Jersey whichremoved the traditional personal liability of the trustee and

placed recourse firmly against the trust assets in certaincircumstances. These provisions were enacted to facilitatethe Trust industry and to assuage the anxieties ofprofessional trustees in the Channel Islands. The panelengaged in a vigorous examination of recent case law inJersey and Guernsey which concerned the applicabilityand interpretation of Article 32 of the Jersey Trust Law andArticle 42 of the Guernsey Trust Law in situations wheretrustees incurred liability in carrying out transactions onbehalf of trusts.

Robert Gardner of Bedell Cristin chaired Session 2 whichfeatured panelists, Catherine Newman QC of MaitlandChambers and Alan Roberts, Grant Thornton for anengaging review of a specific scenario in which trustees inbankruptcy would have to seek to access the assets of atrust of which the bankrupt is a beneficiary with importanttrust powers. Alan Roberts took the role of the trustee inbankruptcy and thoroughly explained all of the steps hewould take from the beginning through to a successfulsettlement with all of the parties, while Catherine Newmanexplored the position of the trustee and expertly dealt withany case law which would affect the progressing positionsbetween the parties. Session 2 was instructive as panelistsgave delegates ideas for solving the seeminglyinsurmountable issues posed.

In Session 3, all attendees had the pleasure of beinginformed and entertained by a mock court application fora freestanding injunction to freeze the assets of a trust inorder to prevent their dissipation by a debtor who was bothsettlor and beneficiary of the trust. The scenario hingedupon a refusal by the trustees to give an undertaking to thecreditors that they will not deal with the trust assetspending determination of the creditor’s claim. Theapplication was heard and determined by Justice Norriswho very kindly served as the ‘court’. Advocating for theinjunction was renowned barrister Elspeth Talbot Rice QCof XXIV Old Buildings, London. The application was ablycountered by Ian Swan, head of the dispute resolutionteam at Babbé Advocates, Guernsey. The presenters werewell-matched and kept delegates on the edge of theirseats. Justice Norris interjected with astute observationsbased on his vast experience on the Bench, whiledelegates attempted to guess which way he would rule.The session drew out the requirements for obtaining afreestanding freezing injunction in Guernsey to assistforeign legal proceedings, not the least of which was toshow exceptional factors where no substantive cause ofaction was brought against the defendant in thejurisdiction. The presentation demonstrated that theexercise of the court’s discretion in such matters requiresa fine balance of several factors to be gleaned from theparticular circumstances of each case.

The second part of the Seminar commenced with ‘Hell Hath

INSOL International Insolvency and Trusts One Day Seminar – 9 September 2015

Justice Norris, Alan Binnington and John Greenfield

Seminar Chairs, Tim Le Cornu and Anthony Dessain

Rob Gardner, Alan Roberts, Catherine Newman QC.


No Fury – Divorces, Bankruptcy and Trusts’. Positioned tocarry on the theme of the tension between trusts andinsolvencies, Paul Smith, Conyers Dill & Pearman moderatedthe discussion/debate between Alex Carruthers of HughesFowler Carruthers and Steven Kempster of Withers WorldWide. The panel posed a problem which enabled them toconsider the respective rights of a husband and wife whoare going through a divorce where there are trusts withlucrative assets. Delegates were made aware of factorswhich a family court might consider in weighing theentitlement of parties in a divorce to marital assets, inclusiveof the overarching concept that the couple is deemed tohave created the wealth together. There was clearly an issuewhether the trusts settled by the husband could beconsidered “nuptial settlements” thereby giving the wifesome entitlement to share in the assets. Much informationwas shared by this panel concerning who should be suedby the wife, methods by which she can access informationabout the trusts and chances of success in some of thetrust-friendly jurisdictions. The trustees’ perspective wasalso fully discussed in relation to all points.

In the fifth Session the question whether insolvent trustsshould be subject to a statutory regime was explored. Thediscussion was relevant since increasingly some propoundthe view that there should be such a regime because (1)trustees enjoy limited liability in Guernsey and (2) there isuncertainty as to the priority of creditors sharing in insolventtrusts. This session was chaired by Jeremy Wessels of

Mourant Ozannes, while Charles Thomson of Baker &McKenzie and James Gleeson of Dickinson Gleeson gaveopposing views on the issue. The creditor-friendly positionwas put forward that there should be a statutory regime forinsolvent trusts so as to promote certainty and fairness andto make financial institutions more accountable. It wasargued that at minimum there should be a model codegoverning these questions and to which jurisdictions couldsubscribe (similar to the UNCITRAL Model Law). Thetrustee-friendly approach (against a statutory regime)included the argument that a creditor who fails to considerwhether his counterparty had the authority to enter into atransaction did not act prudently, so the beneficiaries of atrust should not have to suffer for the creditor’scarelessness. In lieu of a statutory regime, directions fromthe court could be sought on these issues. This discussionprovided delegates with an in-depth look at both sides ofthe debate with commentary on the effect of recent caselaw and a lively question and answer session afterwards.

Cross-border mutual assistance and enforcement was thesubject of the final Session of the Seminar. SamanthaKeen, Chair, EY, Rod Attride-Stirling, ASW Law, WilliamCallewaert, KPMG and Nigel Sanders, Ogier examined thescope of mutual assistance as defined by recent case lawat the highest level. The panel discussed the CambridgeGas1 decision (thought to be the high-water mark formutual assistance) the scope of which was significantlynarrowed by later decisions like Singularis2. The legal

1 Cambridge Gas Transportation Corporation v. Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] UKPC 26. In this case, the Privy Council found that jurisdiction at common law was derived from the principles of universality and assistance. This enabled the Isle of Man to assist in recognising and giving effect to US Bankruptcy proceedings. Lord Hoffman stated that such recognition would give the foreign officeholder those remedies to which he would have been entitled if the equivalent proceedings had taken place in the domestic forum.2 Singularis Holdings Ltd v PricewaterhouseCoopers [2014] UKPC 36. In this case the Privy Council recognised universalism as a part of the common law but declined to agree with Lord Hoffman’s dictum; instead they found that any relief which may be obtained by a foreign officeholder in a domestic court must be subject to the law and public policy of the local jurisdiction. As such, it was found that Bermudan courts could not apply statutory provisions which were applicable to Bermudan liquidations, to sanction production of documents and information to assist a Cayman liquidation. The common law could not make statutory provisions which are applicable in a domestic liquidation accessible to a foreign insolvency.


positions in Guernsey, Jersey, Bermuda and the UK werediscussed in detail. It was also aptly observed that inrelation to the small jurisdictions such as Bermuda, thescope for mutual assistance could be broadened bylegislative reform but this does not happen quickly.Generally, identified means of obtaining mutual assistance

were by letters of request, the inherent jurisdiction of thecourt, the English statutory regime (as available inGuernsey and Jersey) and the local laws of a particularjurisdiction. The discussion was particularly interesting aswell because first-hand accounts were given by panelistswho had been directly involved with key cases on this topic.

The Insolvency and Trusts One Day Seminar providedsignificant value for all attendees in terms of enhancingtheir knowledge, encouraging ideas to flourish andnetworking with others who practice in the insolvency andtrust fields. Big thank you to the sponsors of the event –Platinum Sponsors – Bedell Cristin and Carey Olsen; GoldSponsor – Calunius Capital; Coffee Break Sponsor – KRySGlobal; Lunch Sponsor – Grant Thornton; and DinnerSponsors – EY and Ogier. All in all, the event was aresounding success.

Samanthan Keen, Rod Attride-Stirling, Nigel Sanders, Will Callewaert

Alasdair Davidson and Jasmin SemlitschBedell Cristin Guernsey PartnershipSt Peter Port, Guernsey

In the recent case of In the matter of X (a bankrupt)1,Lieutenant Bailiff Hazell Marshall QC sitting in the RoyalCourt of Guernsey declined an invitation to invoke asupposed inherent jurisdiction to grant an order to anEnglish trustee in bankruptcy compelling third partieslocated in Guernsey to provide information as to the affairsof an English bankrupt.

To compel third parties under possible threat of sanctionis a draconian course and can be found to exist usuallyonly under statutory powers. The English Court has thosepowers (section 366 Insolvency Act 1986) and the usualcourse would be for a trustee to use the “gateway” ofSection 426 of the Insolvency Act 1986 (which has beendirectly extended to Guernsey by virtue of the InsolvencyAct 1986 (Guernsey) Order 1989) via a letter of requestroute to enable the English courts’ powers (or equivalentpowers of the Guernsey courts) in Guernsey.

The Lieutenant Bailiff confirmed that the Royal Court hadjurisdiction to exercise equivalent powers, as long as itwas requested to do so by the formality of letters ofrequest from the English Courts. Such a course wouldhave allowed the trustee to obtain exactly the relief shesought. Indeed, longstanding Guernsey authorities wouldhave all but guaranteed the grant of such an order.

The trustee, though, took a different course. Sheapparently perceived this usual path as cumbersome andinconvenient (requiring the English bankruptcy to be

transferred to the High Court) and had concerns that itmight increase the risk of evasive measures being takenby the bankrupt. However, these were not compellingreasons to allow a distinct statutory mechanism to becircumvented by relying on what the Lieutenant Bailliffdescribed as “a combination of usefulness, a generousassessment of analogy and resort to a supposedbeneficial principle of ‘modified universalism’ ofinsolvency law”.

Amongst an array of creative and “ambitious”submissions, the trustee sought unsuccessfully to drawanalogies with the Guernsey corporate insolvency regime,as well as personal insolvency legislation dating back to1929 (the Loi Ayant Rapport aux Débiteurs et à laRenonciations 1929), and even argued that the EnglishBankruptcy Act 1914 was in wholesale operation inGuernsey. These lines of argument were rejected roundlyby the Court. The split decision of the Privy Council inSingularis2, was also addressed which the trusteesubmitted supported a more pragmatic approach tocross-border insolvencies. The Lieutenant Bailiff, however,was minded to side with the minority judgment to findagainst any customary law or inherent jurisdiction. Thisview is also in keeping with local law previouslyestablished in the Guernsey context, which the judgmentin Singularis suggests no intention of overruling.3

As a result, the trustee’s approach was rejected, and thedecision re-affirms the well-trodden and certainprocedural route where requests for the assistance aremade to the Royal Court by the courts of the UK, Jersey orthe Isle of Man. It remains to be seen, though, whetherGuernsey practitioners consider dusting down theircopies of the 1929 Loi in future applications.

The Singular Minority - In the Matter of X (a Bankrupt)

1 Royal Court, 4 August 20152 Singularis Holdings Limited v PriceWaterhouseCoopers [2015] 2 WLR 971. 3 Bird v Meader (ReTucker (a Bankrupt)) (Court of Appeal No 23/1989); Slinn v The Official Receiver and Liquidator of Seagull Manufacturing Co Limited (Court of Appeal No 69/1991).


INSOL Global Insolvency Practice Course Welcomes Eighth ClassG. Ray Warner,Course Leader, St. John’s University, USA

The successful INSOL Global Insolvency PracticeCourse started its eighth year with a class of 17prospective Fellows. The diverse group consisted ofinsolvency professionals from 11 different jurisdictionsand included the first sitting judge to take the training.The first of three intensive multi-day training sessions,Module A, was presented at the Hotel Russell in Londonfrom 6 through 9 September 2015.

The Course is designed to provide the participants witha thorough insight into the major issues, debates, andtheories in legal and financial topics in internationalinsolvency. Course exercises help participants todevelop the analytical and practical skills needed toapply international insolvency rules to situations they mayencounter in practice. The Course covers both the legalor financial issues involved in international insolvency.

Module A provides a broad-based introduction to cross-border insolvency law. Participants study the structure ofinsolvency law and learn about the sources of moderncross-border insolvency law. The Module A lecturescover US and UK restructuring practice, the EuropeanInsolvency Regulation, the UNCITRAL Model Law onCross-Border Insolvency, cross-border recue in the EU,and accounting and finance. The module also includescase studies and exercises that force the participants tonegotiate a complicated workout and to understandmanagement issues and appreciate the causes ofbusiness failure.

The current participants for the class of 2015-16 areFarid Assaf (Banco Chambers, Australia), Vicki Bell(Minter Ellison, Australia), Erin Broderick (Baker &McKenzie, United States), Barry Cahir (William Fry,Ireland), Christel Dumont (Bonn Steichen & Partners,Luxembourg), Lee Hart (KRyS Global, Cayman Islands),Jeremy Hollembeak (Kobre & Kim LLP, United States),Michael Hughes (Minter Ellison, Australia), Ivan Ikrényi(Ikrényi & Rehák, s.r.o, Slovakia), Kabiito KaramagiKenneth (Ligomarc Advocates, Uganda), Mungo Lowe(Harneys Westwood & Riegels, British Virgin Islands),Elizabeth McGovern (Reed Smith LLP, United Kingdom),Pierre Jean Neijt (Ministry of Justice, District CourtMidden-Nederland, The Netherlands), Ida Nylund(Simmons & Simmons LLP, The Netherlands), SeanPilcher (RBS, United Kingdom), Sophia Rolle-

Kapousouzoglou (Lennox Paton, Bahamas), and JeffreyStower (KPMG, Cayman Islands).

The feedback by way of formal evaluations was verypositive. While the instructional sessions were intensiveand demanding, the programme also providedopportunities for socializing and networking. Module Aopened with dinner at the Hotel Russell, where NeilCooper, Past-President of INSOL, regaled the groupwith his usual wit and command of both insolvencypractice and history. The second evening was spent atPescatori, an Italian and seafood restaurant, whereFelicity Toube QC, South Square, London, delivered anentertaining and informative talk about the Englishcommon law approach to cross-border assistance ininsolvency cases. Both dinners provided an opportunityfor the Fellows to become acquainted with each otherand to network with program alumni and faculty.

Lectures for Module A were André Boraine (University ofPretoria, RSA), G. Ray Warner (St. John’s University,USA), Jan Adriaanse (University of Leiden, TheNetherlands), Bob Wessels (University of Leiden, TheNetherlands), Ian Fletcher (University College London,UK), Nicolas Segal (Freshfields Bruckhaus Deringer LLP,UK), Janis Sarra (University of British Columbia,Canada), Simon Appell (Alix Partners LLP, UK), DolfBruins Slot (Ernst & Young, The Netherlands), Bob Rajan(Alvarez & Marsal LLC, Germany), and Russell Downs(PwC, UK).

The participantss will complete research papers priorto Module B, which is scheduled for January 2016,immediately prior to the INSOL International AnnualRegional Conference in Dubai. Module B includesadditional case studies, further study of the Model Lawand different national insolvency systems. At theconclusion of Module B, the participants will sit for theiroral examinations. The programme culminates withModule C in March 2016, where the participants willapply the information learned in the prior two modulesin a one-week intensive insolvency workout simulationthat includes a video conference court hearing beforea US and a UK judge.

Finally, on behalf of the Core Committee I express ourgratitude for the support received from INSOL, itsmanagement and staff members. The success ofModule A was due in large part to their kind andconscientious efforts.


SMALL PRACTICE FEATURE

Changes in the Bankruptcy Regime in Ireland to not Prevent Forum Shopping

IntroductionIreland now has new bankruptcy legislation which reducesthe period of bankruptcy from twelve years to only threeyears. However, this is still considered a lengthy bankruptcyperiod by debtors and so many have looked to otherjurisdictions with more favorable bankruptcy regimes for asolution to their financial woes. For example, in the USA andthe UK, the period for discharge from bankruptcy is twelvemonths and in some countries such as Switzerland, thebankruptcy regime is not as restrictive as it is in commonlaw jurisdictions. This can provide an attractive alternative(also known as forum shopping) to a debtor’s position in thisjurisdiction where he may face multiple legal actions and apossible bankruptcy application.

The LawThe law in Ireland is currently governed by the BankruptcyAct of 1987 and recently amended by the PersonalInsolvency Act 2012 which provides that a creditor canapply to the High Court for an order of bankruptcy againsta debtor which remains in place for three years.

The law as it is in respect of different jurisdictions in the European Union is governed by the Council Regulation (EC) No 1346/2000 (also known as theInsolvency Regulation) which provides that there shouldbe limitations on the ability of debtors to transfer assets or judicial proceedings from one member state to another seeking to obtain the most favorable position. The reason for this is that if debtors can enter and exit bankruptcy in a short period in one jurisdiction itbecomes an attractive alternative to remaining in ajurisdiction where they will remain insolvent indefinitely

or be forced into bankruptcy for many years.

In order for a debtor to demonstrate that he is entitled tothe benefit of an insolvency regime in a particularjurisdiction he must satisfy a court that his “centre of maininterest” or “COMI” is in that jurisdiction. The InsolvencyRegulation provides that a debtor’s COMI should be theplace where:

(1) the debtor conducts the administration of his intereston a regular basis, and

(2) is therefore ascertainable by third parties

In a clear attempt to encourage enterprise, the law in thisarea in the UK was amended by the Insolvency Act 1986and provides for a period of bankruptcy of twelve months.This means that a debtor (and of course a creditor) canapply for bankruptcy, wherein all the debtor’s assets vestwith an Official Receiver, a civil servant and officer of thecourt who will realize the assets and distribute themamong creditors in accordance with the normal priority ofpayments. The debtor can then emerge from bankruptcytwelve months later having cleared his debts.

This process in the UK has traditionally been a simple onecosting the applicant less than £1,000 in legal fees andcourt duties. There is no authority specifying a minimumperiod of residence, but a period of six months is regularlyaccepted by the UK courts as being sufficient. The courtshave held that a debtor is at liberty to change his COMIand that the country in which the debts were incurred isnot a relevant consideration. Neither is the fact that thedebtor’s residence appears temporary or rented. Theapplicant must file a petition and a statement of affairssetting out all assets and debts with the names andaddresses of creditors. Although the debtor should notifycreditors of his move to the UK they are not notice partiesto the application for bankruptcy.

Recent judgmentThe well known businessman Sean Quinn recently appliedfor bankruptcy in Northern Ireland (NI). The High Courtconsidered the competing arguments for and against theproposition that Mr Quinn’s COMI was in NI. Case law andcommentators have confirmed the general principle thatthe COMI for a company is the registered address, for aprofessional is his professional address and for anindividual his habitual/residential address.

Mr Quinn argued that although he resided in Ireland, hisCOMI was in NI on the basis that he carried out the majority of the administration of his affairs from anaddress in NI. In addition he argued that he had been bornin NI, began his working life there, kept the headquartersof his group there and indeed paid tax there.

Against this argument the Court found that he had residedin Ireland for 32 years, had an Irish passport and votedthere. Interestingly, one of the more persuasive factorsconsidered by the Court was the fact that Mr Quinn had nosterling loans with Anglo Irish Bank (which was contestingthe bankruptcy) and that the main interest of Mr Quinn inthe months preceding the application for bankruptcy wasin litigation with Anglo in which he was embroiled in

Colin Strime: [email protected] Telephone : (+2711) 328-1700 | Telefax: (+2711) 880-2261 | Web: www.fluxmans.com

Knowledge of Insolvency and Business Rescue is something you acquire over time.

An established South African law firm, reputed for expertise, passion and service.

By Mark WoodcockMcDowell PurcellDublin, Ireland


salvaging what he could from his circumstances in theRepublic of Ireland. The Court also found that Mr Quinnhad made no attempt to make the office in NI from wherehe was claiming to conduct his business affairs a matter ofpublic knowledge and so it was not possible for him toargue that his COMI was ascertainable by third parties. Inactual fact, the Court was satisfied from evidenceprovided by witnesses, that Mr Quinn was conducting aconsiderable amount of his business affairs from an officein Belturbet, County Cavan.

ConclusionThe Quinn Bankruptcy judgment is important because itdemonstrates awareness in the UK Courts of what may be agrowing trend by Irish debtors to forum shop. It is arguablethat Mr Quinn made a rather speculative attempt forbankruptcy and that if he had moved to NI for a reasonableperiod and notified creditors of the move he would havemade it more difficult for the Court to refuse theapplication.

INSOL International College of Mediation

Previous editions of INSOL World have reported on theinauguration of this exciting new resource for INSOLmembers and the wider insolvency, banking andjudicial community. The news is that the College is upand running, the first mediator panellists have beenappointed and the first case has been referred to thepanel.

So, in anticipation of members’ curiosity, here are theFAQs that we anticipate.

What cases will the College consider?The College will be a unique resolving resource: weexpect that most cases will have an insolvency andrestructuring focus, but that covers a wide spectrum ofdisputes and uncertainties that arise in insolvencyproceedings.

Will it only deal with cross-border cases?Not necessarily, although the panellists are uniquelyqualified to handle such matters. Moreover, referenceof cross-border matters to the panel will resolve anydoubt as to appropriate jurisdiction in cross-bordercases. However, we also anticipate that for reasons ofspeed, cost, confidentiality, integrity and flexibility, awide range of domestic conflicts will also be referred tothe College.

Who will be appointed to the mediator panel?Quite simply, the world’s leading experts in this field. Alist of the current panel appears below and this will beexpanded to meet demands for the College’s services.

Will it be expensive?The cost will depend on the circumstances and willvary from full fees to pro bono as appropriate. The feeswill be agreed with the mediator and the parties willhave control over costs. All mediators are familiar withthe urgency and cost constraints of insolvency mattersand of course there will be no court fees.

How will the mediator be selected?The parties may select the mediator or mediators fromthe list on the INSOL website or may request INSOL toidentify those panel members who have particularqualifications or experience.

How is the mediator engaged?We intend that there is complete flexibility as to mannerof mediator being engaged. There is draft mediationagreement available but the parties have the ability, inconjunction with the chosen mediator, to fashion acompletely bespoke procedure. The framework thatwe have created is extremely flexible; in substance, thedraft is a series of default options. INSOL is not a partyto the mediation agreement.

Why mediation as opposed to simple litigation?The proposed system is able to work within orindependent of wider litigation.Courts around the globe are encouraging the use ofmediation to avoid the costs and delays of litigationand to reduce pressure on the courts. The use of suchspecialist mediation is defensible to creditors as it isseldom that courts, especially lower courts, have thewealth of specialist experience of the IICoM panelmembers. Moreover, parties have control overconfidentiality of the mediation and are not precludedfrom resorting to litigation if the mediation does notwork. In such circumstances, the court will usually bereassured that parties have endeavoured to reach amediated solution.

Where do I get more information about theCollege?There is a section of the INSOL International web sitededicated to the College and any specific requests forfurther information should be addressed to ClaireBroughton, Executive Director, INSOL International [email protected].

The current list of members of the INSOL InternationalCollege of Mediation is as follows:

Justice Indra Charles, Supreme Court of the Bahamas, Bahamas Philip Crawford, Lawyer, AustraliaGlen Davis, Queen’s Council, EnglandJustice James Farley, (Ret) CanadaBirgit Sambeth Glasner, Attorney at Law andCommercial Mediator, SwitzerlandHon Arthur Gonzalez, (Ret) USAHon Allan L Gropper, (Ret) Mediator and Arbitrator, USAHon Mr Justice Jonathan Harris, Companies &Insolvency Judge, High Court, Hong KongRobert S Hertzberg, Lawyer, USAJustice Ian R C Kawaley, Chief Justice and SeniorCommercial Judge of Supreme Court of BermudaJustice Geoffrey W. M. Kiryabwire, Judge of Court ofAppeal & Constitutional Court, UgandaDr Christoph Paulus, Humboldt-Universitat zu Berlin,Chair of the Academic Forum of INSOL Europe, GermanyHon. James M Peck, (Ret) USAFelicity R Toube, Queen’s Council, EnglandDr Bob Wessels, Deputy Justice, Court of Appeal, The NetherlandsWisit Wisitsora-At, Chief Inspector-General, Ministry of Justice, Thailand.


INSOL INTERNATIONAL ACADEMICS’ GROUP

By Lienne SteynUniversity of KwaZulu-Natal, Durban, South AfricaINSOL Academics’ Steering Committee

As conveyed by Chairperson, Prof Rosalind Mason,after the Academics’ Colloquium held in San Franciscoin March 2015 (INSOL World – 2nd Quarter 2015 29),the Academics’ Group has committed itself, inter alia,to extending engagement between members beyondits formal colloquia and encouraging and facilitatinginteraction and collaborations amongst academics aswell as between academics and practitioners. It alsoresolved to improve communications not only within theAcademics’ Group as a whole, but also within thevarious INSOL regions. Recent activities reflect thatsome of these plans have already come to fruition.

A LinkedIn INSOL International Academics’ Group hasbeen established as an online resource. It is hopedthat this will provide us with an easily accessible forumfor the sharing of information and comments ondevelopments in our respective jurisdictions and foralerting one another to insolvency-related conferences,workshops and seminars around the world. Please visit the link https://www.linkedin.com/grps/INSOL-Academics-Group-8347435/about and join the group,if you have not already done so. Please shareinformation or comments that you believe will be ofinterest to other members.

A great number of academics, who participated in theINSOL Europe Academic Forum’s InsolvencyConference, held on 30 September and 1 October2015 in Berlin, are also members of our INSOLInternational Academics’ Group. These colleaguescame not only from the European continent, but alsofrom further afield – England, Ireland, Australia andSouth Africa.

We would like to take this opportunity especially tocongratulate Prof Paul Omar, Professor of Internationaland Comparative Insolvency Law at the NottinghamLaw School, on his award of a Certificate of SpecialRecognition by INSOL Europe at the conference. Theaward, which also comes with Honorary Membershipof the organization, was bestowed in recognition ofPaul’s service as Secretary of the Academic Forumfrom 2007 to 2015.

After the INSOL Europe conference in Berlin, ProfKathleen van der Linde and Prof Juanitta Calitz spent

some time at Nottingham Trent University. An aim oftheir visit was to investigate opportunities forcollaboration between their institutions. One of thehighlights was their attendance of an LLM seminarpresented by Dr Alexandra Kastrinou and Dr RebeccaParry. While Prof Ros Mason was in Europe, she visitedProf Michael Veder at the Law School at RadboudUniversity, Nijmegen, The Netherlands, with a view toestablishing linkages and to discuss in more depth theproposed one-day pedagogical seminar, planned for11 July 2016, in the lead-up to the 2016 Academics’Colloquium. Please note that, in 2016, the Academics’Colloquium will not coincide with the Main INSOLInternational Conference scheduled for January inDubai, but will be held on 13, 14 and 15 July 2016 inLondon. The one-day seminar at Raboud University,Nijmegen, may be of interest to academics who are traveling in July to London as an additionaluniversity activity. Many colleagues will recall theeminently productive workshop, stemming frominitiatives of Prof Ros Mason, held along similar lines in2005 in Brisbane.

INSOL International and the World Bank Group held itsannual Africa Roundtable Forum on 12 and 13 October2015 in Cape Town1. Prof Andre Boraine, University ofPretoria, Prof David Burdette and Prof Juanitta Calitz,all members of the Academics’ Group, chairedsessions and made presentations. Prof Lienne Steyn,University of KwaZulu-Natal attended, as well as otherSouth African insolvency academics, who, it is hoped,may be persuaded to join our group in the near future.It was a privilege to engage in Cape Town with MarkRobinson and Adam Harris, President and Vice-President, respectively, of INSOL International and withMahesh Uttamchandani of the World Bank Group.

In South Africa, the Faculty of Law at the University ofthe Free State will host its Third International MercantileLaw Conference to be held from 4 to 6 November 2015in Bloemfontein, at which Prof David Burdette, ProfLeonie Stander and Prof Kathleen van der Linde willpresent papers. Another conference for whichcolleagues may wish to plan ahead is the PersonalInsolvency Conference, scheduled for 7 to 9September 2016 in Brisbane, which will be hosted bythe Insolvency and Restructuring Group within theCommercial and Property Law Research Centre of theQueensland University of Technology.

We look forward to even more heightened regional andglobal academic collaboration in the future.

1 Full report on ART 2015 meeting will be featured in the First Quarter 2016 edition of INSOL World.

INSOL INTERNATIONAL ACADEMICS’ COLLOQUIUM

INSOL Academics’ Colloquium13-15th July 2016Grange St. Paul’s Hotel, London

In 2016, the INSOL Academics Colloquium will return toLondon. It will be a two day colloquium commencing witha Welcome Function on the Wednesday evening and twofull day programmes on Thursday and Friday. Theregistration brochure will be online from January 2016.

While a number of academics will be attending theannual INSOL Conference in Dubai in January, thisColloquium has been convened for July in order tobetter align with university teaching calendars.

The last London academics gathering was held inconjunction with INSOL 2001 and proved a greatsuccess. We are looking forward to a similar highquality programme in 2016. The initial response to theCall for Papers has been encouraging and representsa diverse range of jurisdictions as well as issues.

The following topics have been selected for inclusionin the programme:

i) Law reform and policy trends ii) Regional developments iii) Sovereign bankruptcy iv) Insolvency of financial institutions

v) Cross-border insolvency issues in the maritimeindustry

vi) Insolvency issues and small business vii) Insolvency theory – normative insights informing

research viii) Socio-legal perspectives on personal insolvency ix) Teaching innovations and collaborations in

insolvency x) Hot Issues

Not all of the topics listed above will necessarily featureon the final programme. Additionally, consideration canbe given to proposals for papers which fall outside thelist of proposed topics. So, with research on such wide-ranging issues of current significance potentiallyfeaturing, this Colloquium may well be of interest forpractitioner members as well to attend.

Following the successful experiences of our pastcolloquia’s, we once again extend a warm welcome tothe Alumni of the INSOL Global Insolvency PracticeCourse to participate in our meeting, and we lookforward to receiving offers of papers from the Fellows.

There will also be a “Research Forum” session,providing an opportunity for those currently undertakinga research project (including PhD students currentlyengaged in Doctoral studies) to deliver a brief accountof their work, and to generate discussion. Pleasecontact me as soon as possible (and preferably beforethe end of the year) at [email protected]

INSOL 2017

Sponsored by:

The Tenth World INSOL International Quadrennial Congress will take place in 2017 in Sydney. We are counting down thedays with only 18 months to go before we meet in the beautiful city of Sydney.

The Technical Committee have just started working on the full day technical programme. The theme of the programme is“Embracing Change”. If you have any suggestions for topics to be covered please email them to our Technical DirectorSonali Abeyratne at [email protected]

The programme will include a Welcome Barbecue on the Sunday followed by a full day programme on Monday, a half dayon Tuesday, allowing those with little time in Sydney to enjoy an afternoon exploring or, if you have a head for heights,climbing the stunning Sydney Harbour Bridge and seeing this beautiful city from a different perspective, and a final full dayon Wednesday culminating in the Gala Dinner. We are planning some pre and post tours if you have time to take a fewextra days whilst in Australia and accompanying person tours during the Congress.

So don’t forget to book this time out of the office and join us in Sydney in 2017.

INSOL would like to thank our sponsors for their generosity:

Main Sponsors: Borrelli Walsh • FTI Consulting • Grant Thornton • Henry Davis York • Lipman Karas

Welcome Dinner: BDO LLP Gala Dinner: AlixPartners Lunch Sponsor: hww hermann wienberg wilhelm

Monday Breakfast: South Square Congress App: Madison Pacific

If you are interested in sponsoring INSOL 2017 please contact Claire Broughton at [email protected]

Further details about the INSOL Quadrennial Congress, 2017, can be found at www.insol.org.

Tenth World International Quadrennial Congress19 - 22 March 2017, Sydney, Australia

Save these dates in your diary!


American Bankruptcy InstituteAsociación Argentina de Estudios Sobre la Insolvencia

Asociacion Uruguaya de Asesores en Insolvencia y Reestructuraciones EmpresarialesAssociation of Business Recovery Professionals - R3Association of Restructuring and Insolvency Experts

Australian Restructuring, Insolvency and Turnaround AssociationBusiness Recovery and Insolvency Practitioners Association of NigeriaBusiness Recovery and Insolvency Practitioners Association of Sri LankaCanadian Association of Insolvency and Restructuring ProfessionalsCanadian Bar Association (Bankruptcy and Insolvency Section)

China University of Politics and Law, Bankruptcy Law and Restructuring Research CentreCommercial Law League of America (Bankruptcy and Insolvency Section)

Especialistas de Concursos Mercantiles de MexicoFinnish Insolvency Law Association

Ghana Association of Restructuring and Insolvency AdvisorsHong Kong Institute of Certified Public Accountants (Restructuring and Insolvency Faculty)

Hungarian Association of Insolvency PractitionersINSOL EuropeINSOL India

INSOLAD - Vereniging Insolventierecht AdvocatenInsolvency Practitioners Association of MalaysiaInsolvency Practitioners Association of Singapore

Instituto Brasileiro de Estudos de Recuperação de EmpresasInstituto Brasileiro de Gestão e Turnaround

Instituto Iberoamericano de Derecho ConcursalInternational Association of Insurance Receivers

International Women’s Insolvency and Restructuring ConfederationJapanese Federation of Insolvency Professionals

Korean Restructuring and Insolvency Practitioners AssociationLaw Council of Australia (Business Law Section)Malaysian Institute of Certified Public AccountantsNepalese Insolvency Practitioners AssociationNational Association of Federal Equity Receivers

NIVD – Neue Insolvenzverwaltervereinigung Deutschlands e.V.Non-Commercial Partnership Self-Regulated Organisation of Arbitration Managers

“Mercury” (NP SOAM Mercury)Recovery and Insolvency Specialists Association (BVI) Ltd

Recovery and Insolvency Specialists Association (Cayman) Ltd Recovery and Insolvency Specialists Association of Bermuda

REFOR – The Insolvency Practitioners Register of the National Council of SpanishSchools of Economics

Restructuring Insolvency & Turnaround Association of New ZealandRussian Union of Self-Regulated Organizations of Arbitration Managers

Society of Insolvency Practitioners of IndiaSouth African Restructuring and Insolvency Practitioners Association

The Association of the Bar of the City of New YorkTurnaround Management Association (INSOL Special Interest Group)

Member Associations

Conference Diary

Copyright INSOL International – No part of this journal may be reproduced or transmitted in any form or by any means without the priorpermission of INSOL International or any of its members associations. The publishers, editors and authors accept no responsibility for

any loss occasioned to any person acting or refraining from acting as a result of any view expressed herein.Readers should seek advice on all points material to them from someone qualified to practice in the country concerned.

Published by: INSOL International Editors: David Kidd and Nicholas Segal. Design and artwork by: Consort Communications Limited

November 20152 INSOL International Beijing Seminar Beijing, PRC INSOL International www.insol.org12 TMA UK Annual Conference London, UK TMA www.turnaround.org12-14 CLLA Eastern Region Conference New York, NY CLLA www.clla.org26-27 SARIPA Annual Conference Johannesburg SARIPA www.saripa.co.za

December 20153-5 ABI Winter Leadership Conference Phoenix, AZ ABI www.abi.org

January 201624-26 INSOL Dubai Dubai, UAE INSOL International www.insol.org

Annual Regional Conference

February 201624-26 IAIR Insolvency Workshop Amelia Island, FL IAIR www.iair.org

March 20163 INSOL International Mexico City INSOL International www.insol.org

Mexico City One Day Seminar

August 201618-20 CAIRP Annual Conference Montreal, QB CAIRP www.cairp.ca

March 201719-22 INSOL 2017 Tenth World International Sydney, Australia INSOL International www.insol.org

Quadrennial Congress


BERMUDA BRITISH VIRGIN ISLANDS CAYMAN ISLANDS DUBAI HONG KONG LONDON MAURITIUS SINGAPORE / conyersdill.com

OPTIMAL BANKRUPTCY, INSOLVENCY, RESTRUCTURING & LITIGATION SERVICE SOLUTIONS

EXTENSIVE CROSS BORDER EXPERIENCE

EXCELLENCE AND INNOVATION

BERMUDA Robin Mayer DIRECTOR, HEAD OF INSOLVENCY & RESTRUCTURING [email protected] +1 441 299 4929

BRITISH VIRGIN ISLANDS Mark Forte PARTNER, HEAD OF LITIGATION & RESTRUCTURING

[email protected] +1 284 852 1113

CAYMAN ISLANDS Nigel Meeson Q.C. PARTNER, HEAD OF LITIGATION & RESTRUCTURING

[email protected] +1 345 814 7392

For Bankruptcy, Insolvency, Restructuring & Litigation advice, please contact: