The American bankruptcy proceeding of Chapter 11 has been a source of inspiration for insolvency and reorganisation laws throughout the world. Countries such as Spain, Italy and Germany have also recently enacted new versions of insolvency rescue proceeding, using the American Chapter 11 as an example. It therefore comes as a surprise that in the USA itself there is consensus that Chapter 11 is in need of reform. The American Bankruptcy Institute (ABI) has taken the initiative. ABI is a private non-political, non-governmental organization, with over 13,000 members representing all segments of bankruptcy and insolvency practice, including practitioners who advise small, midsize and large enterprises (debtors and creditors), judges, academics, financial advisors, investment bankers and others. ABI has established the ABI Commission To Study The Reform Of Chapter 11. The current thinking is summarized in the ABI commission’s mission statement. “In light of the expansion of the use of secured credit, the growth of distressed-debt markets and other externalities that have affected the effectiveness of the current Bankruptcy Code, the commission will study and propose reforms to chapter 11 and related statutory provisions that will better balance the goals of effectuating the effective reorganization of business debtors—with the attendant preservation and expansion of jobs—and the maximization and realization of asset values for all creditors and stakeholders.”
The ABI Commission has identified 13 topics of study and has composed 13 Advisory Committees to study and discuss all relevant issues. These Advisory Committees are studying and will be reporting on:
1. Financing Chapter 11;
2. Governance and Supervision of Chapter 11 Cases and Companies;
3. Multiple Enterprise Cases/Issues;
4. Financial Contracts, Derivatives and safe Harbours;
5. Executory Contracts and Leases;
6. Administrative Claim Expansion, Critical Vendors and Other Pressures on Liquidity; Creation and / or Preservation of reorganization Capital;
7. Labour and Benefit Issues;
8. Avoidance Powers;
9. Sales of Substantially All of the Debtor’s Assets, Including Going-Concern Sales;
10. Plan Issues: Procedure and Structure;
11. Plan Issues: Distributional Issues;
12. Bankruptcy Remote Entities, Bankruptcy-Proofing and Public Policy;
13. The Role of Valuation in Chapter 11.
The ABI Commission deems it worthwhile to learn in what way certain countries have enacted their versions of certain topics in their legislation. It has therefore also been suggested establishing an Advisory Committee on Comparative Law with the task to report on developments regarding business financial distress in several countries, where it seems that their legislation has been inspired by “Chapter 11 as example”. I will chair the Committee and our Report will explain how the topics mentioned are dealt with in Austria, Australia, Belgium, Canada, France, Germany, Italy, Japan, Korea, the Netherlands, PR of China, Spain, England and Wales. Insolvency Law again seems to be at the forefront of reform initiatives, which are inspired by experiences in insolvency practice in many parts of the world. It will be challenging to see what the next step in global convergence will look like.