Contrasting Reorganization Systems: How Reorganization Work Around the World Dr. Shinjiro Takagi Advisor, Nomura Securities Co., Ltd. International Insolvency Institute 11 th Annual International Insolvency Conference Columbia University Law School June 13-14 2011
Contents Summary USA UK Germany France Insolvency Law Reforms in Japan Out of Court Restructuring in Japan 2
Summary From begining of 21th Century, expedited business restructuring schemes and practices have been changed dramatically in various countries USA UK Prearranged Chapter 11 Section 363 sale Stalking horse bid Pre-pack Administration Germany Self-Administration Pre-pack plan Impairment of Shareholders rights France Conciliation Safeguard Accelerated Financial Safeguard Japan Guidelines for Out of Court Workout Industrial Revitalization Corporation of Japan Business Reorganization by Alternative Dispute Resolution 3
The United States of America Chapter 11 Debtor in Possession (DIP) Automatic Stay DIP Finance Prearranged or Pre-negotiated Chapter 11 cf. Formal Prepackaged Plan Section 363 sale GM Stalking horse bid Break-up fee (av. 2.7%) Expenses reimbursement (av. 1.65%) 4
The United Kingdom Licensed Insolvency Practitioner (IP) Company Voluntary Arrangement (CVA) CVA without insolvency proceeding Plan Accepted by 75% of creditors & approved by court binds dissenting minority creditors (Cramdown) Scheme of Arrangement (SA) SA without insolvency proceeding Cramdown is also applicable Administration Out of court Administration (administrator appointed by debtor company) without ring fence (moratorium) In court Administration with court appointed Insolvency Practitioner Pre-pack Administration without stalking horse bid 5
Germany Infrequently used Insolvency Plan Proceeding under Insolvency Law of 1994 effective from 1999 Exceptional Self administration and Prepackaged Plan Draft Law to Further Accelerate Company Reorganization publicized Aug. 2010 and expected to be adopted before the end of 2011 to prevent migration of Center Of Main Interest (COMI) of ailing companies to UK More Self Administration (ref. American Debtor In Possession, DIP) Appointment of Administrators suggested by creditors and debtors Pre-pack plan (ref. English pre-pack) Proposed sale of business to potential buyer (ref. English Pre-pack administration) Impairment of shareholders rights Debt-Equity Swaps New capital infusion 6
France Commercial Court Judges who are laymen and merchants assisted by judicial administrators and other professionals Judicial reorganization and liquidation (insolvency proceeding) Conciliation (unanimous consents, non collective proceeding) Safeguard Proceeding (2005) (insolvency proceeding listed in EU regulation) Workout Majority rule (majority in number and 2/3 in value) Accelerated Financial Safeguard (effective from Mar. 2011) Financial creditors only without impairment of trade creditors rights Applicable for companies with more than 150 employees or of ann. rev. more than 20m Euro French style pre-pack followed by conciliation 7
Insolvency Law Reforms in Japan 1890 Commercial Code (abolished) with reference to French law 1922 Bankruptcy Law (abolished) with reference to German law 1922 Composition Law (abolished) with reference to Austrian law 1938 Corporate Arrangement Proceeding (abolished) in reformed Commercial Code with reference to English scheme of arrangement 1952 Corporate Reorganization Law (abolished) with reference to former Chapter X of US Bankruptcy Code of 1898 reformed in 1938 1999 Civil Rehabilitation Law 2000 Law on Recognition and Assistance of Foreign Insolvency Proceedings adopting UNCITRAL Model Law on Cross-Border Insolvency 2002 New Corporate Reorganization Law 2004 New Bankruptcy Law 2005 Special Liquidation Proceeding in new Company Code Nomura Securities Co. Ltd. 8
Out of Court Restructuring in Japan 2001 Guidelines for Multi-Financial Creditors Workout was established, with reference to INSOL 8 Principles and London Approach, by National Bankers Association, Federation of Managers Association and other relevant organizations 2003-2007 Industrial Revitalization Corporation of Japan (IRCJ) which was created by Japanese Government but operated by private sector experts, reorganized many big ailing business corporations by out of court restructuring 2003 SME Turnaround Associations, located in all 46 prefectures, reorganized a lot of small and medium sized companies by means of out of court restructuring 2009 Business Reorganization ADR (Alternative Dispute Resolution), licensed by Japanese Government but operated by private sector experts, is restructuring many troubled corporations with excessive debts by out of court restructuring Nomura Securities Co. Ltd. 9
Dr. Shinjiro TAKAGI Curriculum Vitae Advisor to Nomura Security Co. Ltd. since 2007 Admitted in Japanese bar in 1963. After engaging private practice for 25 years, he was appointed as a Judge of Tokyo District Court in 1988, President and Chief Judge of Yamagata District & Family Court in 1995, President and Chief Judge of Niigata District Court in1997 and Presiding Judge of Tokyo High Court (Court of Appeal) in 1998. After resuming private practice in 2000, he reorganized a lot of ailing huge companies. He was Chair of the Committee organized by National Bankers Association etc. to establish the Guidelines for Out of Court Workout to Reorganize Business Corporations in 2001. He was Professor at Chuo University Law School from 2003 to 2006. He was Chair of Industrial Revitalization Corporation of Japan from 2003 to 2007. He earned Doctor of Law or PhD degree in 2002. He is the Honorary Chair of Japan Federation of Insolvency Practitioners (INSOL Japan). He is a member of American Bankruptcy Institute since 1982 and a fellow of American College of Bankruptcy since 1998. He is a Board Member of Governors of International Insolvency Institute. He received the Outstanding Contribution Award of 2005 from the III and was bestowed Rising Sun, Golden & Silver Star Order by the Japan s Emperor in 2007. He wrote numerous books and articles regarding Japanese, American and international bankruptcy laws and civil procedures. Most recently, he was Head of Japan Air Lines Revitalization Task Force. Nomura Securities Co. Ltd. 10