Insolvency & Bankruptcy

Arnold, Kim, ‘Holding DOCAs in the Context of COVID-19’ (2020) 32(2) Australian Restructuring Insolvency & Turnaround Association Journal 13
Abstract: Since the financial impact of the COVID-19 pandemic began to increase there have been many discussions around potential options for businesses to protect themselves and restructure.

Athota, Shreeja, ‘Reverting Back: A Critical Analysis of the Insolvency and Bankruptcy Code’ (SSRN Scholarly Paper ID 3710944, 13 September 2020)
Abstract: The Insolvency and Bankruptcy Code was enacted in 2016 with an intention to consolidate the existing framework by creating a single law for insolvency and bankruptcy. It may be noted that one if the major objectives of the Code is to protect the interests of the creditors. The Code sought to remedy the various ‘illnesses’ suffered by the insolvency laws in the previous regime by shifting away from the debtor-in-possession model, prevalent in the previous regime, to the one where both the creditors and the debtors operate within a framework of equity and fairness to all stakeholders to preserve the value of the Company. However, the Code was not perfect by all means, it is still a work under progress. Furthermore, in light of the COVID-19 pandemic, the government has shifted its focus to protecting the interests of the businesses. Although, the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 seems have promulgated with the intention of protecting companies and promoters from no fault liability due to the COVID-19 pandemic, the ambiguities in the legislation seem to raise more questions than answers. In fact, the recent ordinance seems to indicate a transition to the earlier model which was detrimental to the interests of the creditors. Therefore, this essay seeks to address analyze the issues and ambiguities with specific reference to the 2020 Ordinance.

Atkins, Scott and Kai Luck, ‘Legal Update: Corporate and Business Rescue in a COVID-19 World’ (2020) 32(2) Australian Restructuring Insolvency & Turnaround Association Journal 16–21
Abstract: Executive power, court intervention and the opportunity for meaningful law reform to the voluntary administration regime.

Bangha-Szabo, Attila and Anthony Morton, ‘Germany: Restructing Update’ (2020) 35(7) Journal of International Banking & Financial Law 511–512
Abstract: Reviews changes to German business restructuring procedures under IDW S6 during the coronavirus pandemic and the temporary relaxation of specific insolvency laws. Outlines the role and scope of IDW S6, its uses in risk mitigation, its acceptance as proof as to the merits in restructuring proceedings by the tax authorities, and the issues which an IDW S6 restructuring report must cover.

Ben-Ishai, Stephanie, ‘Consumer Bankruptcy in the Wake of COVID-19: The Calm Before the Storm’ (2021) 57(3) Osgoode Hall Law Journal 637–664
Abstract: The crisis created by the spread of COVID-19 seems likely to permanently change the structure of economic activity moving forward—more people are working from home, taking fewer business trips, and gravitating towards online spending. In the short-term, Canada has done well to provide temporary economic support to those temporarily or permanently affected by the virus. This unprecedented level of government support, together with the unparalleled level of voluntary creditor forbearance for late payments, has led to a remarkable drop in consumer bankruptcy filings in April and May 2020. However, a significant surge in the need for debt relief and bankruptcy filings is predicted for the near future. This article concerns the effect of COVID-19 on the household debt carried by Canadian families and on the debt relief measures that are available to them. How, if at all, will the socio-economic composition of those with serious debt problems change? Are the debt relief measures currently available through the Bankruptcy and Insolvency Act adequate to the task? What changes to the system of credit regulation might help those affected by the virus?

Bodul, Dejan, ‘Redefining the Classic Concept of the Court?: Responses to the Corporate Solvency Problem in the Ongoing Covid-19 Crisis’ (2021) 5(EU 2021 – The Future of the EU in and After the Pandemic) EU and Comparative Law Issues and Challenges Series (ECLIC) 444–467
Jurisdiction: Croatia
Abstract: The coronavirus pandemic is pushing large number of firms towards insolvency by dramatically changing consumption patterns and business operations. The first wave of liquidity-focused policy responses (Act on Intervention Measures in Enforcement and Insolvency Proceedings for Duration of Special Circumstances) prevented or delayed more severe consequences for the corporate sector. While some liquidity support is still needed, the crucial issue that must be tackled now is that of corporate solvency. This paper addresses the role of the Financial Agency (hereinafter: FINA), which, as a legal entity with public authority, has (in)appropriate legal authority in bankruptcy proceedings over the rights of entities. As in the previous paper, a multidisciplinary scientific approach is advocated, which should contribute to the consideration of various aspects of the relationship between FINA, the state, the judiciary and the current tendency of Dejudicijalization.

Bradley, Christopher G, ‘The New Small Business Bankruptcy Game: Strategies for Creditors Under the Small Business Reorganization Act’ (2020) 28 American Bankruptcy Institute Law Review 47
Abstract: In late 2019, Congress enacted the Small Business Reorganizations Act. The Act’s timing is fortuitous: Weeks after it went into force in February, 2020, the Covid-19 pandemic damaged countless small businesses—enterprises that the Act may provide an opportunity to save. The Act provides businesses with powerful options to reorganize under a new ‘subchapter V’ of Chapter 11 of the Bankruptcy Code. Subchapter V eases the requirements for confirmation of plans that creditors don’t approve by simply requiring debtors to project their ‘disposable income’ and pay it to creditors for three to five years; provides incentives for the parties to reach agreement on reorganization plans; lowers the debtor’s disclosure obligations; eliminates the regular appointment of an official committee of creditors; requires the appointment of a trustee to aid in plan negotiations; and permits modification of loans secured by a mortgage on a debtor’s primary residence.Creditors will have to develop a new playbook for subchapter V cases. Most scholarship has emphasized debtors’ new options, but this Article presents an analysis from the perspective of creditors. Of course, creditors are not created equal; strategies will only be useful to creditors with claims substantial enough to justify the investment of time and money. Well-positioned creditors will extract whatever strategic gains they can at the expense of the debtor and of less privileged creditors. The game is multilateral, not simply creditor vs. debtor. The Article suggests strategies for variously positioned creditors to protect their interests.The Article suggests seven major strategies: 1) Creditors should seek influence or control a debtor’s entry into subchapter V by making agreements with debtors concerning the election, using financial maneuvers to work around subchapter V’s debt limits, or challenging the debtor’s eligibility for entry.2) Creditors should monitor and make use of trustees as circumstances warrant, whether by cultivating and working closely with them, by seeking to minimize their role and save expenses, or, at the extreme, by opposing them and seeking their removal. 3) To combat debtors’ tendency to delay, creditors should apply pressure on the debtor by emphasizing the statutory emphasis on speed, scrutinizing the debtor’s required disclosures, and enlisting the trustee and court where possible.4) Creditors should avoid holding general unsecured claims, and, if eligible, should take the election offered by §1111(b) of the Code. 5) Subchapter V places a premium on plans being approved by creditors, so those whose votes are needed for confirmation should extract concessions in exchange for their vote. For those privileged creditors, this should be a major point of leverage.6) Creditors should look to obtain information at every opportunity, including at the required meeting of creditors and status conference early in the case, in the disclosures and filings made by the debtor, and through formal discovery. 7) Creditors extending credit secured by a residence should designing lending practices to ensure that they cannot be ‘modified’ by debtors in bankruptcy. Many of the strategies above will be of keen interest to secured and other privileged classes of creditors. The Article predicts that with these and other strategies in hand, such creditors will not lose much ground under subchapter V. But the law lowers protections for general unsecured creditors, particularly those who remain passive. A number of the strategic tools presented in this Article can aid disfavored general unsecured creditors as well—but frequently, they will have too little at stake to make it worth putting their energy into the new small business bankruptcy game.

Collins, Daniel M, ‘Insolvency Act 1986 Section 214: A Suspension’ (2020) 31(8) International Company and Commercial Law Review 441–446
Abstract: Discusses the temporary suspension of directors’ personal liability for wrongful trading under the Insolvency Act 1986 s.214 in response to the coronavirus pandemic. Reviews key features of s.214 and the requirements for liability, including the absence of an intention to defraud. Considers whether its suspension was necessary to protect directors, whether it may have a detrimental effect and whether the suspension may need to be extended.

Coneyworth, Amanda, ‘Safe Harbour Advisory in Unchartered Waters Is It Still Relevant?: An Insolvency Practitioner’s Perspective’ (2020) 20(7) Insolvency Law Bulletin 132–134
Abstract: Prior to COVID-19, we saw safe harbour protection under section 588GA of the ‘Corporations Act 2001’ (Cth) as a mechanism for directors to proactively work with their company while it was under

Eszenyi, Thea, ‘ASIC: Impact of COVID-19 - a Regulatory Perspective.’ (2020) 32(2) Australian Restructuring Insolvency & Turnaround Association Journal 48
Abstract: To assist Registered Liquidators (RLs) navigate their obligations during the COVID-19 pandemic, here’s an overview of our current and future insolvency regulatory areas of focus.

Fruchter, Steven, ‘Section 363 Sales After the Covid-19 Pandemic’ (2021) 95(2) American Bankruptcy Law Journal 367–388
Abstract: The article explains the necessity for U.S. debtors to provide a virtual attendance option for participating in Bankruptcy Code Section 363 asset auctions during the COVID-19 pandemic and in the post-pandemic world. Topics discussed include the role of the Bankruptcy Act of 1867 as the origin of Section 363, implication of the various standards used by bankruptcy courts to determine asset eligibility for auction under Section 363, and benefit of remote auctions in terms of competitive bidding.

Gattegno, Julie, ‘Tenant Rescue and the Cross-Class Cram-Down’ (2020) 2039 Estates Gazette 54–57
Abstract: Compares the potential impacts on landlords of tenants entering company voluntary arrangements (CVAs) and adopting restructuring plans under the Corporate Insolvency and Governance Act 2020. Considers problems posed by CVAs and outlines grounds on which landlords might challenge them. Looks class composition under restructuring plans and explains the cross-class cram-down, a mechanism similar to that used for US Ch.11 insolvencies.

Ghio, Emilie et al, ‘Harmonising Insolvency Law in the EU: New Thoughts on Old Ideas in the Wake of the COVID-19 Pandemic’ (2021) 30(3) International Insolvency Review (forthcoming)
Abstract: The COVID-19 crisis, which hit the world with full force in 2020, represents one of the greatest health and economic crises in recent history. The pandemic paralysed the world economy, forcing many countries around the globe to take emergency measures. Countries’ emergency responses to the crisis uncovered a tension between the continuous phenomenon of global economic interdependence and the tendency for nation-state governance during the crisis. Although this dichotomy was quite acute in the European Union (EU) at the onset of the pandemic – reflected overall by Member States’ preferences for national solutions over common multilateral solutions – governments eventually converged towards similar responses to the spread of the virus. These responses to the crisis included partial or total isolation of populations, travel bans, and the temporary closure of non-essential businesses. This so-called phenomenon of ‘copycat coronavirus policies’ was the result of regulatory emulation, which occurred spontaneously, with limited direct impetus from the EU. Our paper investigates whether insolvency and restructuring laws, policies, and measures followed a similar pattern. The study focuses on six selected European countries: Denmark, France, Germany, Italy, the Netherlands and the United Kingdom (UK). From a methodological perspective, our contribution relies on a case study approach. Building on the findings of this case study, our paper, then, draws more general conclusions on the process of harmonisation across the EU.

Gore, Kiran Nasir and Charles H Camp, ‘The Interplay Between Insolvency Proceedings and Parallel International Arbitration Proceedings in the Post-Pandemic World’ [2020] The World Financial Review (published online 16 July 2020)
Abstract: As businesses emerge into the post-pandemic world, insolvency proceedings offer practical solutions to businesses aiming to recover from the recent global economic fallout. These businesses hope to repay their debts, restructure and reorganize their assets, and generally manage their operations. While effective, insolvency-based solutions are often designed only to further domestic legal and policy goals and they do not perfectly interact with cross-border business relationships. This article draws upon the authors’ expertise in international dispute resolution to discuss the legal and practical challenges found at the intersection of insolvency proceedings and parallel international arbitration proceedings. These insights provide businesses and their insolvency advisers with a blueprint for managing competing concerns at a sensitive and unpredictable time in a business’s lifecycle.

Gurrea-Martínez, Aurelio, ‘Insolvency Law in Times of COVID-19’ (Ibero-American Institute for Law and Finance, Working Paper No 2/2020, 17 April 2020)
Abstract: The international spread of the coronavirus is not only generating dramatic consequences from a social perspective but it is also heavily affecting the global economy. For this reason, governments, financial regulators and international organizations are responding to the coronavirus with a package of legal, economic and financial measures. Among the legal measures included in these packages, many countries, including Australia, Germany, Spain, India, Singapore, Colombia, Portugal, Czech Republic, Russia, New Zealand, the United Kingdom, and the United States, have proposed or implemented temporary changes to their insolvency frameworks. This paper starts by discussing whether using the insolvency system should be the optimal solution to deal with companies affected by the coronavirus. For that purpose, it will analyze the role and limits of insolvency law. It then discusses the most relevant insolvency reforms taking place around the world as a response to the global pandemic, as well as other insolvency and insolvency-related reforms that could be implemented to minimize the harmful economic effects of COVID-19. The paper will conclude by arguing that, even though these responses can provide companies and corporate directors with a valuable breathing space, these reforms need to be accompanied by a more comprehensive package of legal, financial, tax and economic measures to support businesses, employees and the well-functioning of the judicial system.

Iheme, Williams and Sanford Mba, ‘Coping with the COVID-19 Pandemic: A Comparative Study of the Capabilities of the Kenyan and Nigerian Insolvency Frameworks’ (2020) 6(2) Journal of Corporate and Commercial Law & Practice 112–138
Abstract: The COVID-19 pandemic has undeniably ravaged the global economy and plunged many countries in Africa, including Kenya and Nigeria into an economic recession. This article departs from the premise that credit is the lifeblood of market systems. Accordingly, the credit and insolvency laws of both countries must be adjusted in certain ways during and after the pandemic, in order to enable them to cope with the dire economic challenges resulting from the pandemic. The article identifies some material defects in the Insolvency Act 2015 (Kenya) and the Companies and Allied Matters Act 2020 (Nigeria), and argues that these defects will debilitate a meaningful economic recovery from the pandemic. The paper shows the lack of suitability of their existing insolvency frameworks, as well as some aspects of the public law: it proposes a number of tailor-made recommendations that benefitted from the experiences of certain other common law jurisdictions.

‘INSOL Europe/LexisNexis COVID-19 Tracker of Insolvency Reforms’ (2020) 20(7) Insolvency Law Bulletin 122–123
Abstract: A tracker of insolvency reforms globally produced by Lexis Nexis in partnership with INSOL Europe is now available: ‘Coronavirus (COVID-19) Tracker of insolvency reforms globally’. Details shown by the Tracker for Australia as at 19 May 2020 are included.

Jaradat, Nashat Mahmoud, ‘The Economic Impact of the Covid-19 Pandemic Related to Bahrain’s Bankruptcy Law’ (2021) 12(13) Turkish Journal of Computer and Mathematics Education (TURCOMAT) 926–942
Abstract: The purpose of this paper is to address the concerns relating to the economic impact of the Covid-19 Pandemic in the Kingdom of Bahrain by observing the preventive measures taken by the government to ensure minimal economic deterrence. Furthermore, the paper shall also address the role and the position of the Reorganization and Bankruptcy Law no. (22) 2018 of Bahrain in light of the economic duress faced by the businesses in Bahrain and the role played by the government and financial institutions in resolving matters relating to bankruptcy that would be more prevalent due to the Covid-19 Pandemic. The importance of the research is highlighted by highlighting the economic impact and the mechanism of bankruptcy procedures followed in Bahrain, especially in light of the global economic crisis it is facing due to the Covid-19 pandemic. The study aims to clarify the laws related to bankruptcy with a study of the current situation in Bahrain. As there is no previous study regarding the economic effects on the movement of trade in the Kingdom of Bahrain in light of the Corona pandemic and the role of bankruptcy law in that. It was also clarified through this study to the close relationship between local legislation and international legislation and agreements related to this subject.

Johnson, Creola, ‘Crushed by COVID-19 Medical Bills, Coronavirus Victims Need Debt Relief Under the Bankruptcy Code and Workers’ Compensation Laws’ (2021) 125(2) Penn State Law Review 453–499
Abstract: After the U.S. declared COVID-19 a pandemic, cracks in the U.S.’s fragile privatized healthcare system were exposed. At the start of the pandemic, 74 million U.S. residents were already uninsured or underinsured. To date, over 7.7 million recently terminated employees have lost their employer-provided health insurance, while over 24.6 million individuals have been infected with COVID-19 and 800,000 have been hospitalized. As a result, coronavirus survival often comes with astronomical medical bills like the $1.1 million hospital bill received by Michael Flor, a 70-year-old survivor who spent 62 days in the hospital for treatment. This Article examines how the U.S.’s flawed healthcare system and federal bankruptcy law may work together to unfairly penalize debtors burdened with medical debts arising from treatment for an infectious disease, like COVID-19. The financial fate of many burdened with infectious-disease medical bills will depend on whether a court characterizes such bills as ‘consumer’ debts. Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, individuals with ‘primarily consumer debts’ are subject to a complex calculation known as the ‘Means Test.’ Debtors who have their massive medical bills characterized as non-consumer debts are allowed to wipe out those bills quickly in a Chapter 7 case. Debtors who have such bills characterized as consumer debts and who fail the Means Test are forced into a five-year repayment plan in a Chapter 13 case, where they pay down their unsecured debts, including medical bills. As a result, courts are effectively penalizing debtors who lack adequate health insurance and who involuntarily contract a contagious disease. To prevent such perverse results, this Article proposes that bankruptcy law be amended to exclude infectious-disease medical bills from the definition of consumer debt. Also, to obviate the need for some individuals to file for bankruptcy relief, this Article proposes that workers’ compensation (“workers’ comp”) laws be amended to include COVID-19 as an occupational disease for any ‘essential worker,’ as defined in each state, so that infected essential workers can have their medical bills paid from workers’ comp funds. If a former U.S. president infected with COVID-19 was considered essential for the nation’s survival and, therefore, entitled to taxpayer-funded medical care in state-of-the-art facilities, then front-line employees—who are required to work for the benefit and survival of us all—should absolutely receive COVID-19 treatment at no cost to them. Legislative action is especially needed due to the current spread of new, highly contagious mutations of COVID-19 in the U.S. With the proposed legislative amendments in place, the U.S. would ensure that survivors are protected from financial devastation due to involuntarily contracting an infectious disease.

Kamalnath, Akshaya and Hitoishi Sarkar, ‘Airline Insolvencies’ (SSRN Scholarly Paper ID 3707823, 8 October 2020)
Abstract: An important aspect of business is the possibility of insolvency. India’s new insolvency law, the Insolvency and Bankruptcy Code, 2016 (IBC) has attempted to streamline insolvencies and facilitate restructuring; although there are particular issues for airline insolvencies. The issue of cross-border insolvencies further remains unaddressed in the IBC and is particularly relevant to airlines. This chapter aims to outline international best practices in corporate insolvency and also India’s approach; with a specific focus on the civil aviation sector.This chapter is divided into five parts. The first part is the introduction. The second part gives an overview of the goals of corporate insolvency and the legislative framework in India. Part III explores specific solutions for insolvencies of companies in the civil aviation sector internationally. Part IV details airline insolvencies in India and Part V concludes with some thoughts about the future legislative reform and development in India.

Keeper, Trish, ‘New Zealand’s New Temporary Safe Harbour and Business Debt Rehabilitation Scheme: Measures Introduced in Response to COVID-19’ (2020) 20(7) Insolvency Law Bulletin 126–128
Abstract: The New Zealand government has introduced legislation to temporarily change certain insolvency and directors’ duties laws due to the impacts of COVID-19. These changes are included in the ‘COVID-19 Response (Further Management Measures) Legislation Bill 2020’ (the Bill) that passed its third reading in the House of Representatives on 13 May 2020. The focus of this article is two changes to the ‘Companies Act 1993’ (the Act), although the Bill amends or modifies the application of 45 different Acts. The two changes are: the introduction of a temporary safe harbour for directors from breaches of the duties against reckless trading and incurring unperformable obligations; and the introduction of a temporary COVID-19 Business Debt Hibernation (BDH) scheme. These measures were outlined in a Cabinet Paper released on 4 April 2020 (the Cabinet Paper), that stated that the proposed changes were necessary to address the impacts of COVID-19 on otherwise profitable and viable businesses that are facing a real risk of being liquidated in the near future because of the serious disruption they are incurring. The two amendments are discussed in more detail below.

Levenstein, Eric, Roxanne Webster and Malachizodok Mpolokeng, ‘Business Rescue When Liquidation Proceedings Have Been “Initiated”’ (2020) 20(6) Without Prejudice 8–9
Abstract: The COVID-19 pandemic has had an unprecedented impact on the South African economy. Although necessary, the measures that have been employed to deal with the novel coronavirus, which include a nationwide lockdown, have resulted in several companies and businesses feeling the pinch. Despite government’s efforts to ameliorate these challenging conditions through various social relief and economic support packages, South African companies and businesses remain under enormous pressure, with many facing the harsh reality of financial distress. It comes as no surprise, therefore, that companies are increasingly turning to business rescue.

Lewis, Paul B, ‘The “Small Business Reorganization Act” and the Coronavirus’ (2020) 20(7) Insolvency Law Bulletin 129–131
Abstract: This article will look at the changes made to the restructuring of small businesses under the ‘Small Business Reorganization Act’. To do so, it will first provide a brief overview of Chapter 11, followed by a discussion of the changes made to Chapter 11 under the 2019 Act. The article will conclude with a discussion of the impact of the Act to date as small businesses in the United States struggle to survive.

Linklater, Lisa and Jodie Wildridge, ‘Changing Times: Aspects of Creditor Enforcement in Administration and in the New Moratorium’ 33(3) Insolvency Intelligence 96–98
Abstract: Considers the possible impact on creditors of the temporary ban on insolvency proceedings imposed during the coronavirus pandemic. Reviews key aspects of the moratorium, the issues arising when administrators and courts are deciding whether to consent to enforcement of creditors’ rights, the relevant creditor considerations, and how the moratorium’s rules compare to those of the Corporate Insolvency and Governance Bill 2019-21.

Lubben, Stephen J, ‘Puerto Rico; Act III’ (2020) 15(4) Capital Markets Law Journal 453-463
Abstract: The Commonwealth of Puerto Rico and certain of its affiliated entities have filed ‘bankruptcy’ petitions under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (‘PROMESA’). This short paper provides a brief update on the current status of the restructuring process. As is well known, Puerto Rico’s economy was already deeply distressed, and then came hurricanes, earthquakes, and COVID-19. Given the poor state of the local economy, the island arguably needs extensive debt relief. Before COVID-19, the oversight board had proposed modest debt relief, and even that was deemed unacceptable by bondholders, who argued for cuts to local pensions equal to those being faced by bondholders. As a result, the restructuring process is apt to continue to be quite lengthy and contentious. Puerto Rico’s indeterminate legal status – as neither U.S. state nor independent nation – further complicates matters.

McCormick, Hamish, ‘AFSA: Personal Insolvency and the Response to the COVID-19 Crisis’ (2020) 32(2) Australian Restructuring Insolvency & Turnaround Association Journal 45
Abstract: My last contribution to the ARITA Journal came just weeks after the devastating bushfires tore through large parts of the country. Thousands of Australians were affected, and the economic impacts of the disaster will likely linger for many years.

McHattan, Natasha, ‘“COVID-19” Update: Government Response to COVID-19 Pandemic’ (2020) 32(2) Australian Restructuring Insolvency & Turnaround Association Journal 6–12
Abstract: A summary of the key Government measures introduced in response to the economic and related impacts of coronavirus.

Mithal, Arnav, ‘Amendments to Insolvency and Bankruptcy Code 2016 in Light of COVID-19’ (SSRN Scholarly Paper ID 3621341, 6 June 2020)
Abstract: The impact of COVID-19 has forced many companies to file for bankruptcy and amongst this the government has made amendments to the Insolvency and Bankruptcy Code 2016 to prevent companies from insolvency proceedings. Such amendments are treated a boon for the companies as it has given them chance of survival in these difficult times.

Morrison, Edward R and Andrea C Saavedra, ‘Bankruptcy’s Role in the COVID-19 Crisis’ (SSRN Scholarly Paper ID 3567127, 7 April 2020)
Abstract: Policymakers have minimized the role of bankruptcy law in mitigating the financial fallout from COVID-19. Scholars too are unsure about the merits of bankruptcy, especially Chapter 11, in resolving business distress. We argue that Chapter 11 complements current stimulus policies for large corporations, such as the airlines, and that Treasury should consider making it a precondition for receiving government-backed financing. Chapter 11 offers a flexible, speedy, and crisis-tested tool for preserving businesses, financing them with government funds (if necessary), and ensuring that the costs of distress are borne primarily by investors, not taxpayers. Chapter 11 saves businesses and employment, not shareholders. For consumers and small businesses, however, bankruptcy should serve as a backstop to other policies, such as the CARES Act. Consumer bankruptcy law’s primary goal is to discharge debts, but that’s not what most consumers need right now. What they need is bridge financing, and perhaps forbearance, until the crisis ends, they get back to work, and they regain their ability to pay their debts again. These key policy levers—bridge financing and forbearance—are available in theory to small businesses in Chapter 11, especially if the government supplies the bridge financing when credit markets are dysfunctional. The practical reality is that bankruptcy is expensive for small businesses, which may deter them from using it in the first place. Equally important, our courts will be flooded if Chapter 11 is the primary rescue policy for small businesses.

Pardo, Rafael I, ‘On Bankruptcy’s Promethean Gap: Building Enslaving Capacity into the Antebellum Administrative State’ (2021) 48 Fordham Urban Law Journal (forthcoming)
Abstract: As the United States contends with the economic crisis triggered by the COVID-19 pandemic, federal bankruptcy law is one tool that can be used to resolve the financial distress suffered by individuals and businesses. When implementing this remedy, the question arises whether the law’s application should be viewed as limited to addressing private debt matters, without regard for the public interest. This Article answers the question by looking to modern U.S. bankruptcy law’s first forebear, the 1841 Bankruptcy Act, which Congress enacted in response to the depressed economic conditions following the Panic of 1837. That legislation created a judicially administered system that nationalized bankrupts’ assets, some of which featured prominently in the business of slavery. This Article focuses on a specific episode from New Orleans, which at the time was the nation’s third-most-populous city, had the nation’s largest slave market, and had one of the nation’s largest money markets. One of the bankruptcy cases commenced in that city involved the administration and sale of Banks Arcade, which was a premier commercial exchange for auctioning enslaved Black Americans. This history about how the federal administrative state restructured one component of the U.S. slavery complex should prompt critical reflection on how present-day bankruptcy law manages the fallout from a financial crisis. This Article concludes that courts have the authority to permit the public to advocate for its interests in distressed assets redeployed through the federal bankruptcy system.

Routledge, James, ‘Rethinking Insolvency Law amid the COVID-19 Pandemic’ (2021) Pacific Accounting Review (advance article, published 6 April 2021)
Purpose: Amid the COVID-19 pandemic, it is important to consider the effectiveness of insolvency law given the increase in companies facing financial distress. Current insolvency law was not designed in the context of the unprecedented challenges of the pandemic. Therefore, it may not provide the framework needed to assist the rehabilitation of distressed companies that is important to economic recovery. The purpose of this paper is to briefly discuss the rethinking of insolvency law policy with a view to maximising opportunities for rescue and rehabilitation.
Design/methodology/approach: The commentary offers suggestions on how insolvency law can maximise opportunities for rehabilitation. The approach is to consider competing theoretical perspectives on the objective of insolvency law and provide commentary on rethinking key insolvency law provisions to better meet the needs of distressed businesses in the unprecedented circumstances of the pandemic and into the future.
Findings: This paper concludes that in the context of the pandemic insolvency policy that is value-based and debtor-friendly is needed to promote rehabilitation. Insolvency law should refocus on debtors and rehabilitation rather than being excessively focussed on the interest of creditors.
Originality/value: This paper offers a unique and timely commentary on the capacity of insolvency law to respond to the unforeseen COVD-19 pandemic.

Shearman & Sterling, ‘Corporate Insolvency and Governance Act 2020 Gains Royal Assent’ (2020) 35(10) Journal of International Banking Law and Regulation N127–N128
Abstract: Notes key measures introduced by the Corporate Insolvency and Governance Act 2020, their application to limited liability partnerships, and Re Lehman Brothers Europe Ltd (In Administration) (Ch D) on whether former administrators whose discharge from liability was not dealt with by the creditors’ committee before it was disbanded had standing to apply to the court for discharge under the Insolvency Act 1986 Sch.B1 para.98(2)(c).

Shearman & Sterling, ‘COVID-19: Changes to Be Made to UK Insolvency Regime’ (2020) 35(7) Journal of International Banking Law and Regulation N88
Abstract: Notes impending revisions to the UK insolvency regime, in response to the coronavirus pandemic, to permit UK companies undergoing restructuring or corporate rescue to continue trading. Details the main reforms, including a moratorium to protect companies considering restructuring, the protection of suppliers, and the temporary suspension of the wrongful trading regime under the Insolvency Act 1986 s.214.

Shearman & Sterling, ‘United Kingdom: COVID-19 – Insolvency Framework’ (2020) 35(8) Journal of International Banking Law and Regulation N98
Abstract: Highlights the Government’s intention to introduce changes to the insolvency framework in response to the coronavirus pandemic. Details the additional restructuring tools proposed, including protection of companies’ supplies to allow trading to continue, and the introduction of a new restructuring plan.

Stegner, Clemens and Wolfgang Höller, ‘Coronavirus – Effects on the Insolvency Filing?’ [2020] Lawyer (Online Edition) 1
Abstract: The article discusses how the COVID-19 presents companies with major challenges including restricted operation, cancellations and the lack of customers that can also lead to liquidity problems in otherwise healthy companies and discusses requirements for opening insolvency proceedings. It informs that in the case of corporations, insolvency law overindebtedness – are met, there is an obligation of the Austrian Insolvency Code to file an application for bankruptcy without culpable hesitation.

Stuber, Walter, ‘Brazil: COVID-19 - Insolvency Lawsuits’ (2020) 35(8) Journal of International Banking Law and Regulation N89–N90
Abstract: Highlights the 31 March 2020 publication by the President of Brazil’s National Council of Justice of Recommendation No.63/2020, detailing six guidelines to mitigate the impact of restrictions introduced in response to the coronavirus pandemic, and relating to courts dealing with bankruptcies and business recovery actions. Summarises the main recommendations, including that general face-to-face meetings with creditors be suspended.

Swift, Duncan, ‘Rescue, Recovery & Renewal’ (2020) 13(2) Corporate Rescue and Insolvency 64–65
Abstract: Reflects on the features of Chancellor Rishi Sunak’s first Budget that may affect insolvency and restructuring, including measures to help businesses through the coronavirus pandemic. Suggests that confirmation of changes to the creditor status of HMRC, and proposals to make directors personally liable for corporate tax debts where abuse of the insolvency regime is suspected, will hamper corporate rescue and represent a missed opportunity.

Tribe, John and Stephen Baister, ‘The Suspension of Debt Obligations and Bankruptcy Laws during World War I and World War II: Lessons for Private Law during the Corona Pandemic from Previous National Crises’ (2020) 33(3) Insolvency Intelligence 67–78
Abstract: On 28 March 2020, the Insolvency Service announced the government was placing before Parliament what are presumed to be temporary reforms to the insolvency law to help companies through the current economic crisis caused by the corona pandemic. The reforms that have so far been highlighted are a moratorium on the ability to present or pursue winding-up petitions and the suspension of the law on wrongful trading. These emergency moves are not without precedent. This article examines a range of measures that were introduced during the First and Second World Wars that were designed to respond to the unusual circumstances caused by a global crisis. The effect of these measures, e.g. the Liabilities (War-Time Adjustment) Act 1941, was to postpone debtors’ liabilities but not to eliminate them. This article demonstrates that these measures went some way towards meeting their objective of saving small businesses from bankruptcy.

Vaccari, Eugenio, ‘Changes to UK Insolvency Rules in the Wake of Covid-19: A Much-Needed Help for Businesses or an Unjustified Harm to the Rule of Law?’ in Carla Ferstman and Andrew Fagan (eds), Covid-19, Law and Human Rights: Essex Dialogues (School of Law and Human Rights Centre, University of Essex, 2020) 127–136
Abstract: The economic impact of the Covid-19 outbreak has triggered calls for emergency fiscal and legislative measures to address liquidity and legal problems in several areas of law. Some of these measures address specifically companies in financial distress and insolvency statutes. Among the proposed changes to the insolvency framework, the UK Government announced a suspension of wrongful trading provision as outlined in section 214 of the Insolvency Act 1986 (‘the Act’). This announcement was later implemented (with significant amendments) in section 10 of the Corporate Insolvency and Governance Bill (‘the Bill’). This measure applies retrospectively from 1 March 2020 for a 3-month period or one month after the coming into force of the Bill, whichever is later. To assess the need for such a measure, this paper investigates the requirements to establish a successful claim for wrongful trading and the interpretation of those requirements, stemming from the case law. It also discusses the announced suspension as implemented by the Government in the Bill. This analysis strongly suggests that the suspension of (liability for) wrongful trading does nothing to achieve the purpose for which it was introduced, i.e. to facilitate business rescue and/or to help viable companies to survive the crisis created by the Covid-19 pandemic. To the contrary, the suspension of personal liability actions against the directors is likely to curb the rule of law in the UK. Laws are deferred and the exercise of civil liability remedies restricted without any apparent justification and with no proof that this measure is relevant to address the crisis created by the Covid-19 pandemic.

van Zwieten, Kristin, Horst Eidenmueller and Oren Sussman, ‘Bail-Outs and Bail-Ins Are Better than Bankruptcy: A Comparative Assessment of Public Policy Responses to COVID-19 Distress’ (European Corporate Governance Institute, Law Working Paper No 535/2020, 8 August 2020)
Abstract: COVID-19 has severely disrupted the conduct of business around the globe. In jurisdictions that impose one or more ‘lockdowns’, multiple sectors of the real economy must endure prolonged periods of reduced trading or even total shutdowns. The associated revenue losses will push many businesses into bankruptcy. No public policy response can recover these losses. States can, however, act to reduce the amplification of the shock by the way in which they treat the cohort of newly bankrupt businesses. In jurisdictions where a well-functioning reorganisation procedure is capable of producing value-maximising outcomes in normal conditions, the temptation may be to subject this cohort to treatment by such procedures. This temptation should be resisted, not only because of the (significant) costs of these procedures, or because of concerns about institutional capacity to treat a high volume of cases, but also because such procedures are likely to be a poor ‘fit’ for the treatment of COVID-19 distress. In our view, the more attractive routes to relief are bail-ins (one-time orders to creditors or counterparties, or some class thereof, to forgive), bail-outs (offers to assume the debtor’s liabilities, or a class thereof), or some combination of the two. In this paper, we explain why a public policy response is necessary to mitigate the amplification of the shock caused by trading shutdowns, and compare treatment by the prevailing bankruptcy law with treatment by bail-ins or bail-outs along a range of dimensions. We conclude by tentatively suggesting some principles to help guide the choice between bail-ins and bail-outs, and the design of either form of intervention.

Vernea, Candit-Valentin, ‘Pandemic, Insolvency and Labour Relations: Current Challenges’ (2021) 52(3) European Journal of Social Law / Revue Européenne du Droit Social 81–89
Abstract: By means of this article, the author analyzes the effects of the new coronavirus disease, both from an economic perspective and from the perspective of the affected workforce. The article is structured in four parts. The first part aims to introduce the burst of the COVID-19 pandemic and its global effects. The second part analyzes the evolution of the insolvencies of the economic operators in Romania after the outbreak of the COVID-19 pandemic. The third part analyzes the methods used by most companies in their efforts to tackle the spread of the SARS-CoV-2 infection. The last part of the article, with a concluding role, presents the effects of the new coronavirus pandemic on the Romanian labour market.

Walters, Adrian, ‘The Small Business Reorganization Act: America’s New Tool for SME Restructuring for the COVID and Post-COVID Era’ (2020) 41(10) Company Lawyer 324–325
Abstract: Highlights the passage of the US Small Business Reorganization Act 2019 and its implications for corporate restructuring in the wake of the coronavirus pandemic. Reflects on its key provisions, its aim of facilitating consensual plans of organisation within short timeframes and at low cost, the significant role of the supervisory trustee, and the difficulties it is likely to face. :

Wan, Wai Yee, ‘Should Hong Kong Reform Its Insolvency Law in Times of COVID-19?’ (2021) Company Lawyer (forthcoming)
Abstract: With the onset of the COVID-19 pandemic, the number of insolvency filings by otherwise economically viable firms globally is expected to rise significantly. Hong Kong will not be an exception. Hong Kong does not currently propose to enact legislation to impose a universal standstill of contractual obligations in response to COVID-19, as is the case in other jurisdictions. Once Hong Kong Monetary Authority’s (HKMA’s) measures for the banks to support the small and medium size enterprises (SMEs) and the Hong Kong Government’s economic relief packages come to an end, an enormous wave of defaults will come. The collapse of SMEs will have a serious impact in Hong Kong as SMEs account for 45% of the private sector total employment and 98% of all of the business establishments. The Hong Kong Government is proposing to enact legislative reforms to allow for provisional supervision and corporate rescue, which are out-of-court procedures, to facilitate restructuring if the major secured creditor consents. The proposed corporate rescue framework is long overdue. In recent years, many common law jurisdictions, including Singapore and the UK, have reconsidered and modernised their insolvency framework to include debtor-in-possession features in court-supervised restructurings that are based on Chapter 11 of the US Bankruptcy Code 1978 (Chapter 11). These features include an automatic moratorium or stay of proceedings and the ability to cram-down dissenting creditors not only within the same class but across classes of creditors. Further, specifically in response to COVID-19, several jurisdictions have enacted or are in the process of enacting insolvency legislation that allows SMEs and small businesses to access the bankruptcy or restructuring provisions more speedily. The question that arises whether even if the provisional supervision and corporate rescue framework is enacted, whether Hong Kong should make other more far-reaching reforms, particularly to its court-supervised restructuring framework. This article proposes that urgent consideration be given to simplify and modernize the insolvency and restructuring framework in Hong Kong. :

Wetlitzky, Tobias, ‘Water Under the Bridge? A Look at the Proposal for a New Chapter 16 of the Bankruptcy Code from a Comparative Law Perspective’ (2021) 37(2) Emory Bankruptcy Developments Journal 255–284
Abstract: In light of the ongoing COVID-19 pandemic, bankruptcy law will play a crucial role in addressing the consequences of the global economic shutdown. Many large corporations in the U.S. will need to undergo chapter 11 bankruptcy proceedings or may attempt to reorganize their financial debt in an out-of-court workout. However, section 316(b) of the Trust Indenture Act of 1939 has long been blamed for making out-of-court restructurings practically impossible, because it requires unanimous approval from bondholders. In 2014, the National Bankruptcy Conference presented a solution for the inefficiencies in bond workouts by proposing a streamlined debt reorganization procedure for borrowed money in a new chapter 16 of the Bankruptcy Code. This Article argues that now is time to take a new look at the 2014 proposal from a comparative law perspective. Considering the legal situation in England and Wales as well as Germany, the Article outlines a proposal for a modern workout mechanism for bond debt.

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