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Comparative Guide to Restructuring Procedures in the Uk, Us, Difc, Adgm and Uae

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Comparative Guide to Restructuring Procedures in the Uk, Us, Difc, Adgm and Uae January 2021 COMPARATIVE GUIDE TO RESTRUCTURING PROCEDURES IN THE UK, US, DIFC, ADGM AND UAE UK RESTRUCTURING PLAN UK SCHEME OF US CHAPTER 11 DIFC INSOLVENCY LAW – ADGM – ADGM – SCHEME OF UAE PREVENTIVE ARRANGEMENT REHABILITATION ADMINISTRATION ARRANGEMENT COMPOSITION PLAN The Corporate Insolvency and Chapter 11 of the US REGIME Governance Act 2020 Companies Act 2006 Bankruptcy Code ADGM Insolvency Companies Regulations Federal Law by Decree No. (9) of DIFC Insolvency Law (DIFC Regulations 2015 2020 2016 on Bankruptcy Law No. 1 of 2019) and DIFC Insolvency Regulations 2019 Court In court: two court hearings: As per UK restructuring plan In court: court-supervised In court: court-supervised In court: court-sanctioned In court: court-sanctioned In court: court supervised process Process process process process process convening hearing: plan Court based distressed company-led proponent applies to court to Various court hearings to Directors of a company propose process convene stakeholder approve a variety of motions, scheme of arrangement of meetings e.g., “first day” hearing to company’s affairs to its creditors enable business operations to sanction hearing: court has continue (including DIP The company’s directors must discretion whether to financing), “second day” notify the court in writing that sanction hearings to grant final relief on they intend to make a proposal to certain interim orders that were the creditors under the regime Otherwise, out of court heard at the “first day” hearing, omnibus hearings to address administrative motions, follow- on hearings, sale hearing (if applicable), plan confirmation hearing - number of hearings depends on circumstances / complexity of the case Scope Allows a company to compromise Similar scope as the new UK As per the UK restructuring Similar scope as US Chapter 11 Similar scope as the UK There is no prescribed scope. The preventive composition plan with its creditors (secured and restructuring plan plan, but broader provisions to restructuring plan A scheme could be an (“PCP”) is similar to the voluntary unsecured) and shareholders facilitate greater degree of arrangement or compromise arrangement schemes under English operational restructuring - see, about anything that the law and the procedure de sauvegarde May – but need not - implement e.g., below, “Treatment of company and its creditors or under French law as it provides a operational changes Contracts” shareholders may settle on scheme for a solvent debtor to avoid among themselves liquidation by agreeing with its Flexible options: plan may creditors to repay all or part of its provide for: debts pursuant to a court-approved settlement plan with the assistance of payment of classes of claims; a trustee sale of all or part of the Similar scope as US Chapter 11 debtor’s assets; exit financing; capital restructuring including possible issuance of new debt or equity securities; resolution of corporate issues, including cancellation of shares/ securities and amending constitutional documents; and / or UK RESTRUCTURING PLAN UK SCHEME OF US CHAPTER 11 DIFC INSOLVENCY LAW – ADGM – ADGM – SCHEME OF UAE PREVENTIVE ARRANGEMENT REHABILITATION ADMINISTRATION ARRANGEMENT COMPOSITION PLAN The Corporate Insolvency and Chapter 11 of the US REGIME Governance Act 2020 Companies Act 2006 Bankruptcy Code ADGM Insolvency Companies Regulations Federal Law by Decree No. (9) of DIFC Insolvency Law (DIFC Regulations 2015 2020 2016 on Bankruptcy Law No. 1 of 2019) and DIFC Insolvency Regulations 2019 possible releases and indemnification Eligibility No need to demonstrate As per UK restructuring plan No need to demonstrate DIFC company, where the No need to demonstrate No need to demonstrate No need to demonstrate insolvency, insolvency, but does require insolvency, but must show debtor is, or is likely to become, insolvency, but does require insolvency, but does require but does require evidence of actual or evidence of actual or likely some kind of “financial unable to pay its debts and there evidence of actual or likely evidence of actual or likely likely financial difficulty e.g. debtor financial difficulty distress” and that debtor is not is a likelihood of a successful financial difficulty financial difficulty has ceased making payments filing just to take advantage of rehabilitation plan being agreed Open to domestic and foreign the benefits of the Bankruptcy Open to companies Open to companies Open to UAE commercial companies, companies which can Code Where a foreign company is the incorporated (or re-domiciled) incorporated in the ADGM, any person that qualifies as a trader demonstrate sufficient connection subject of insolvency in the ADGM, and certain and certain other legal pursuant to UAE law, civil with England e.g., English law Famously low jurisdictional proceedings elsewhere, the other legal entities with entities with exceptions companies/professionals and governed debt or COMI in threshold; includes where DIFC court shall assist that exceptions companies established in free zones England debtor has a place of business foreign court upon request (if the free zone does not have specific or property in the US (e.g., cash The ADGM Insolvency regulations relating to restructuring) If a non-English company uses a in a US bank account or The DIFC Insolvency Law Regulations adopt the plan, obtaining recognition of the location of stock certificate) adopts the UNCITRAL Model UNCITRAL Model Law on proceedings in home jurisdiction Law on Cross-Border Cross Border Insolvency will be key, as court orders do not US courts have long relied on Insolvency which among other expressly purport to have extra- ‘property’ element of the test to items allows the recognition of territorial effect establish broad jurisdiction foreign insolvency officials, over foreign companies foreign orders as well as concurrent insolvency Court orders expressed to have proceedings in the DIFC extra-territorial (global) effect Control Typically, the proposal will be Typically, the proposal will be Management / board will stay A rehabilitation plan may only An administrator is appointed Existing management remain A PCP application can only be made launched by the company - launched by the company in control and the debtor be initiated by the debtor to take over and control the in control of the company. An by the debtor although also possible for following extensive continues business operations. management of the distressed application for a scheme of creditors or shareholders to make commercial negotiations, However, the debtor must seek Existing management remain in company. arrangement may be made The debtor is placed under the control a proposal or a counter proposal although an application may be approval for all decisions and control (and liable) except where by: of one or more trustees appointed by made by: actions not in the ordinary there is evidence of the company An administrator may be the court or named by the debtor and Management / board stay in course of business e.g., sale of or its management, officers or appointed by: the company accepted by the court. During a PCP, control and debtor continues the company assets / entry into new directors being guilty of fraud, the debtor continues to manage its business operations financing dishonesty, incompetence, or the debtor company itself any creditor or business, albeit under the supervision any creditor or shareholder mismanagement shareholder of the of the trustee No requirement for appointment of the company 120-day “exclusive period” for a creditor which holds company of a supervisor / trustee debtor to propose a plan - The rehabilitation regime security over the whole or The PCP will not be available where a liquidator or subject to extension to a date requires the company to appoint substantially the whole of a liquidator or the debtor is already subject to not beyond 18 months after the an insolvency practitioner as a the debtor company’s restructuring, bankruptcy or an administrator petition date. Once exclusivity rehabilitation nominee who will assets an administrator liquidation proceedings lapses, any party may propose a be responsible for certain The directors remain in control competing plan company rights and duties the court upon the of the company, continue to application of the debtor trade and undertake the Where fraud or misconduct are The appointment of the company, its directors or company's business, unless alleged, the Bankruptcy Court insolvency practitioner takes one or more creditors of otherwise provided by the may appoint a trustee; place prior to the notification of the debtor company terms of the scheme however, appointment of a the rehabilitation plan trustee is not common Where a case is expected to have large administrative fees, 2 UK RESTRUCTURING PLAN UK SCHEME OF US CHAPTER 11 DIFC INSOLVENCY LAW – ADGM – ADGM – SCHEME OF UAE PREVENTIVE ARRANGEMENT REHABILITATION ADMINISTRATION ARRANGEMENT COMPOSITION PLAN The Corporate Insolvency and Chapter 11 of the US REGIME Governance Act 2020 Companies Act 2006 Bankruptcy Code ADGM Insolvency Companies Regulations Federal Law by Decree No. (9) of DIFC Insolvency Law (DIFC Regulations 2015 2020 2016 on Bankruptcy Law No. 1 of 2019) and DIFC Insolvency Regulations 2019 a judge may appoint a fee examiner to make sure that professional fees and expenses paid by the estate are reasonable, actual, and necessary Moratorium Potential to combine with new No automatic moratorium to Automatic moratorium (the Automatic
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