Forum Shopping for Effective Corporate Rescue in the UK — A German Perspective.
Norton Journal of Bankruptcy Law and Practice, Volume 24, Number 5, 2015, p. 396-435.
- Corporate financial distress has been a great economic challenge throughout Europe in recent years. Insolvency and restructuring law ought to provide effective proceedings to either facilitate an orderly insolvency process (liquidation) or an effective rescue mechanism for going concerns. The divergence in the national insolvency and restructuring laws of Member States in the European Union has provided many opportunities for forum shopping and regulatory competition. One example of this phenomenon is the use of UK schemes of arrangement by German companies to restructure their financial debts. This competition has also led to legal reforms, among others, in Germany. Strengthening insolvency legislation, however, is not enough to promote corporate rescue but rather the availability of sound rescue proceedings is necessary before and after formal insolvency.
- This article focuses on forum shopping for effective corporate rescue and considers whether informal or statutory proceedings would be more appropriate for the purpose. An overview of the legal framework and judicial infrastructure introduces important parameters for effective corporate restructurings from a German perspective, in particular by comparing the German protective shield proceeding to the UK scheme of arrangement as a mechanism for financial restructuring in a corporate rescue. This is followed by an analysis of case law in which German companies have implemented a UK scheme of arrangement to restructure their financial debt. The article concludes that the German protective shield proceeding is just one step on a long road towards effective corporate rescue and financial restructurings in Germany. As it cannot be expected to become an effective practical alternative to the scheme of arrangement in the short run, German companies will continue to engage in forum shopping for financial restructurings in the UK.