Eligible Financial Contracts: The Canadian Answer to Forward Contracts
by Nancy Roberts
Osler, Hoskin & Harcourt LLP; Toronto
Eligible Financial Contracts under the Companies’ Creditors’ Arrangement Act
In Canada, the Companies’ Creditors Arrangement Act (CCAA) operates in similar fashion to chapter 11 of the U. S. Bankruptcy Code. An insolvent debtor company may apply to the court for creditor protection pursuant to the CCAA. If the court grants such relief, the initial order issued by the court typically provides for a broad stay of proceedings against the debtor company. The debtor then attempts to develop and negotiate a plan of arrangement or compromise that must be accepted by a majority in number and two-thirds in value of each class of creditors voting on the plan, and must also be sanctioned by the court in order to become effective.
Read the full article. (Materials from the 2006 Winter Leadership Conference)
Chapter 15 in Practice: The Canadian Perspective and the MuscleTech Story
by Derrick C. Tay and Jennifer Stam
Ogilvy Renault LLP; Toronto
Since the adoption of the Model Law on Cross-Border Insolvency in 1997, the restructuring community has been watching to see who would adopt the Model Law (or versions of it) into their existing insolvency legislation. Starting in 2000, a number of countries including Eritrea, Japan, Mexico, Poland, Romania, Serbia, South Africa, Montenegro, British Virgin Islands and most recently Great Britain began adopting the Model Law.
In October 2005, the United States also jumped on the Model Law bandwagon, enacting chapter 15 of the U.S. Bankruptcy Code. As we watched from Canada, questions arose as to how the new chapter 15 would differ from its predecessor, §304 of the Code, and whether the ALI Guidelines and Cross-Border Protocols would now become distant memories. Now, a year later, we have seen how it has been implemented by the courts in a number of instances including the first commercial Canada-U.S. Cross-border insolvency proceeding, namely, the MuscleTech proceedings.
Read the full article. (Materials from the 2006 Winter Leadership Conference)
Current Issues and Developments in Cross-border Insolvencies
Panelist:
Hon. Mary F. Walrath and Hon.
Christopher S. Sontchi
U.S. Bankruptcy Court; Wilmington, Del.
John Wm. Butler, Jr.
Skadden, Arps, Slate, Meagher & Flom LLP; Chicago
Luc A. Despins
Larry J. Nyhan
James L. Patton, Jr.
Young Conaway Stargatt & Taylor, LLP; Wilmington, Del.
Origins of Chapter 15
Prior to its repeal with the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act, §304 provided authority for adjudicating international insolvency issues before the U.S. Bankruptcy Courts where a proceeding had already been filed or would be more appropriately filed in a foreign jurisdiction. The purpose of this section was to shield American creditors and assets located within the Unites States from piecemeal distribution of assets resulting from foreign reorganization or liquidation procedures. Section 304 acted as a jurisdictional aid to foreign bankruptcy representatives by providing for discovery and a structured distribution of assets.
Read the full article. (Materials from the 2006 Delaware Views from the Bankruptcy Bench and Bar)
China’s New Bankruptcy Law: An Introductory Note
By: Chunlin Zhang
World Bank Office; Beijing
China’s market-oriented reform has generally been successful since it started in the late 1970s. However, the transition of its corporate and financial sectors has suffered greatly from the absence of a functioning insolvency regime. While a trial bankruptcy law was adopted in 1986 and took effect in 1988, it covered only state-owned enterprises (SOEs), which now account for only about one third of the country’s total output. Non-state-owned enterprises have been left to a set of simple insolvency rules of the Civil Procedure. Even for SOEs, the 1986 law was inadequate and not frequently used. When the State Council (China’s cabinet) decided in 1994 to cope with the rising nonperforming loans owed by financially distressed SOEs through bankruptcy on a pilot basis, it had to put in place additional rules and procedures in the form of government policy for courts to follow, and carefully control the scale of the clean-up action. The pilot program was later expanded to cover over 1,000 SOEs every year, but it has never been able to get rid of a range of weaknesses, in particular, the weak protection of creditor’s rights due to heavy influence of some local governments on the legal proceeding, and the lack of effectiveness and efficiency of reorganization due to the inadequacy of relevant procedures. Recognizing the critical importance of a modern bankruptcy regime, the government started drafting a new bankruptcy law at the same time as it launched the SOE bankruptcy pilot program.