Faculty of Education, Social Sciences and Law

School of Law

Rescuing Corporate Reorganisation: a transatlantic evaluation

February 2007 - February 2008

This project challenges the traditional thesis that UK law in the sphere of corporate bankruptcy is pro-creditor whereas US law is pro-debtor. It suggests this characterisation is an over-simplification.

Creditors have a greater role in the initiation of the formal procedure in the UK than the US but creditors in the US may have a decisive role in the terms and outcome of any restructuring through their willingness to grant new financing and the terms on which such financing is granted.

The project also points to the conclusion there is evidence of convergence between the two systems in practice. The rescue system in the UK is market-oriented centring on saving businesses rather than corporate shells. The UK "rescue culture" embraces sale of businesses as operational going concerns or alternatively piecemeal realisation of assets where that improves the position of creditors.

In the US, the company inititates the Chapter 11 restructuring process and the emphasis has then traditionally been on classes of creditors and shareholders working together under the supervision of the bankruptcy court to come up with a restructuring plan.

But the focus has shifted. Often Chapter 11 is now used as a convenient mechanism for the division and sale of company assets. Lenders may turn the company's financing tap on or off, depending on the speed at which restructuring is implemented or assets sold. Senior corporate managers may also be offered financial inducements if they manage to complete Chapter 11 quickly. There has been increased recourse to prepackaged cases.

Project Publications

Books

McCormack, G. Corporate Rescue Law - An Anglo-American Perspective. Edward Elgar Publishing, 2008 (see Corporate Rescue Law).

Journal articles

"Control and Corporate Rescue - An Anglo-American Evaluation" (2007) 56 International and Comparative Law Quarterly 515-55

"Super-priority New Financing and Corporate Rescue" [2007] Journal of Business Law 701-732

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