Asian Principles of Global Restructuring Project - Learning Points
- I attended a very interesting webinar hosted by 3CL this evening where the panelists (i.e. Justice Kannan Ramesh, Drew & Napier's Sushil Nair and SMU's Prof Aurelio Martinez) spoke about the "collective responsibility of the global insolvency community to go down the path of convergence".
- Asia has become a magnet for investment. FDI as a % of global FDI was 12% to 2003, 23% in 2017 and 30% in 2019. In fact, 60% of investment into Asia comes from other Asian companies.
- However, Asia’s legal architecture has not kept pace with the rate of economic change.
- The panellists felt that it was important for Asia's insolvency regimes to be harmonised as they play a critical long-term role in driving economic development by ensuring that the Asian region is attractive to investment. Rules must be predictable and consistent across jurisdictions. Companies must be able to get through a fair and efficient exit in multi-jurisdictional workouts; otherwise there is a real risk of jurisdictional arbitrage.
- The absence of convergence would lead to fragmentation of multi-jurisdictional workouts.
- In the 16 jurisdictions that are the subject of ABLI/III's research study, there still exist significant differences.
- First, in the case of out of court workouts, some jurisdictions (e.g. HK, Singapore, Thailand) have regulatory bodies which issue policy docs to facilitate out of court restructurings of debts. Some jurisdictions have formal legal structures e.g Japan has the "Turnaround ADR" legislation where a mediator specialising in turnarounds is appointed, while South Korea has the Corporate Restructuring and Promotion Act. Others have no formalised rules or guidelines e.g. Cambodia, Laos, Vietnam, Indonesia.
- Second, with respect to recognition of foreign insolvency proceedings, some jurisdictions like India and HK lean towards accepting UNCITRAL model law. Other countries like Indonesia and Thailand do not recognise foreign insolvency proceedings at all. While in the PRC, foreign insolvency judgments can be recognised by way of specific legislation or bilateral treaties
- Finally, DIP financing as a concept is unfamiliar to most Asian jurisdictions. However, a trend can be gleaned across most Asian jurisdictions where DIP financiers have priority over unsecured creditors.
- Sushil made an interesting comment - he said that he is optimistic about convergence as the philosophy of compromise is ingrained in Asian culture - and that is the key for restructuring efforts to work. Perhaps! Let's see how this goes. I'm watching this space.
- Exciting times to be an insolvency lawyer.
Thank you so much, Danny! It was a pleasure having you at the webinar. Many thanks for your valuable comments and questions!
Senior Assistant Director at Asian Business Law Institute
3 年Dear Danny, thanks for this. I have taken the liberty to pass this take-away to the speakers (who may not be on LinkedIn).