Court-Supervised Restructuring of Large Distressed Companies in Asia: Law and Policy
By Wai Yee Wan (City University of Hong Kong)
In my new monograph, Court-Supervised Restructuring of Large Distressed Companies in Asia: Law and Policy (Hart Publishing, 2022), I offer an in-depth analysis on four economically significant Asian jurisdictions, Mainland China, India, Hong Kong and Singapore, which have recently either reformed or are considering reforming, their corporate restructuring laws to promote regimes conducive to restructuring financially distressed but otherwise economically viable companies. These jurisdictions continue to adhere to a framework that requires the court’s final approval but draw references from Chapter 11 of the Bankruptcy Code 1978 in the United States and/or the schemes of arrangement in the United Kingdom. However, the institutional and market structures are very different in Asia; in particular, Asia has far higher concentration in shareholdings among listed firms, including holdings by families and the state, and different composition of creditors. These creditors include not only financial and operational creditors, but also among financial creditors, there is no homogeneity; for instance, financial creditors include not only bank creditors but also varying types of sophisticated and retail bond investors, distressed debt investors and asset management companies which have purchased the loans to address the non-performing loan problems.
This monograph explains how notwithstanding the legal transplantation, corporate restructuring laws in the four Asian jurisdictions have adapted and evolved due to the frictions in shareholder-creditor, manager-creditor and the creditor-creditor relationships. However, the adaption and evolution of corporate restructuring laws are also impacted by five other important factors: (1) the role of the state in resolving non-performing loans through asset management companies and their equivalents in emerging jurisdictions; (2) the quality and oversight of insolvent practitioners who serve as gatekeeper intermediaries; (3) the role of the courts who act as the final gatekeeper in approving the restructuring plans; (4) the regime for enforcement of contracts or non-bankruptcy entitlements; and (5) the regime for the enforcement of directors’ duties.
In making the claims as to how corporate restructuring laws are transplanted and adapted in each of the four Asian jurisdictions, the monograph provides rich empirical evidence on the restructuring cases, defaults and the financial markets. It argues that any reforms must be designed to address fundamental issues of corporate governance, bank regulation and enforcing non-bankruptcy entitlements in practice.