EFMLG Symposium on Standard Market Documentation 'Bankruptcy' and 'Act of Insolvency‘ A Need For Harmonization In Light Of New Legislation On Bankruptcy Procedures? Dr. Ulrich Parche London, 15 September 2009
Topics • Synoptical Charta • Issues • Practical Ambiguities • Observations & Recommendations 2
ISDA EMA GMRA GMSLA Criteria for defining Act of Insolvency/Bankruptcy 1992 / 2002 2001 / 2004 1995 / 2000 1995 / 2000/2009 1. Dissolution Yes Yes Yes Yes or has a resolution passed "seeking any dissolution" "seeking any dissolution" for its dissolution (other than pursuant (other than in either case, to a consolidation, pursuant to a Corporate amalgamation, merger) Restructuring resulting in a solvent Successor Entity) Sec. 5 (a)(vii)(1) Sec. 6 (1)(a)(viii)(1) Para. 2. (a) (iv)(3rd HS) 1992: Para. 1.1.(d)(3rd HS) 2000: Para 2.1.(iv)(3rd HS) 2009: Para. 2.1.1.(d)(3rd HS) 3
ISDA EMA GMRA GMSLA 1992 / 2002 2001 / 2004 1995 / 2000 1995 / 2000/2009 2. Non-Payment a) unable to pay its Yes Yes No No debts as they become due b) fails generally to Yes No No No pay.... c) admitting in writing Yes No Yes Yes its inability to pay its debts as they become due Sec. 5 (a)(vii)(2) Sec. 6 (1)(a)(viii)(8) Para. 2 (a)(ii) 1995: Para. 1.1.(b) 2000: Para. 2.1.(ii) 2009: Para. 2.1.1.(b) 4
ISDA EMA GMRA GMSLA 1992 / 2002 2001 / 2004 1995 / 2000 1995 / 2000/2009 3. Petition for bankruptcy, winding- Yes Yes Yes Yes up or insolvency Initiated by 1992: (a) the party anyone, anyone, the party, any Credit apart from the apart from the Support Provider of such (b) a governmental or counterparty to this counterparty to this party or any applicable juridical authority or self- Agreement in respect of Agreement in respect of Specified Entities of such regulatory organization any obligation under this any obligation under this party, having jurisdiction of the Agreement Agreement Party in a Specified 2002: Jurisdiction ("Competent + (a) by a regulator, Authority) supervisor or any similar official with primary (c) a person, other than a insolvency, rehabilitative Competent Authority or regulatory jurisdiction over it in the jurisdiction of its incorporation or organization or the jurisdiction of its head or home or (b) a person or entity not described in clause (A) 5
ISDA EMA GMRA GMSLA 1992 / 2002 2001 / 2004 1995 / 2000 1995 / 2000/2009 Procedure 1992: commences an Insolvency presenting or filing presenting or filing the petition, instituted Proceeding against itself or of a petition in respect of it of a petition in respect of it or presented against it, takes any corporate action [the party] in any court or [the party] in any court or (A) results in a to authorize such Insolvency before any agency before any agency judgment of Proceeding alleging alleging insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation, or (B)…(next slide) 2002: a) institutes or has instituted against it a proceeding seeking a judgement of insolvency or bankruptcy b) instituted or presented and results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation 6
ISDA EMA GMRA GMSLA 1992 / 2002 2001 / 2004 1995 / 2000 1995 / 2000/2009 Grace Period 1992: in case petition if a person other than a 30 days (debatable as 30 days (debatable as does not result in a Competent Authority reference to petition is reference to petition is judgement of insolvency, commences an insolvency unclear) unclear the petition may not be proceeding against the Party (30 day period shall not (30 day period shall not dismissed, discharged, in a Specified Jurisdiction and apply for a petition for apply for a petition for stayed or restrained in such action is not winding-up or any analogous winding-up or any analogous each case within 30 dismissed or stayed proceeding) proceeding) days of the institution or within 30 days following presentation thereof the action or event commencing the Insolvency 2002: If a petition, Proceeding, unless the instituted or presented commencement of such by a person or entity proceeding by such person described in (b) above, or under the given does not result in an circumstances is judgement of insolvency, obviously inadmissible or the petition may not be frivolous dismissed, discharged, stayed or restrained in each case within 15 days of the institution or presentation thereof Sec. 5 (a)(vii)(4) Sec. 6 (1) (a) (viii)(2), (3), (5) Para. 2. (a)(iv)(1st HS) 1995: Para.1.1 (d)(1st HS) 2000: Para. 2.1. (iv)(1st HS) 2009: Para. 2.1.1.(d)(1st HS) 7
ISDA EMA GMRA GMSLA 1992 / 2002 2001 / 2004 1995 / 2000 1995 / 2000 / 2009 4. Petition for Yes Yes Yes Yes restructuring 5. Appointment of Yes Yes Yes Yes a) trustee Yes Not explicitly Yes Yes b) administrator Yes Yes Yes Yes c) receiver Yes Yes Yes Yes d) liquidator Yes, provisional Yes Yes Yes liquidator e) conservator Yes Not explicitly (applicability Not explicitly (applicability Not explicitly (applicability via g)) via g)) via g)) f) custodian Yes Not explicitly (applicability Not explicitly (applicability Not explicitly (applicability via g)) via g)) via g)) g) other similar Yes Yes Yes Yes for it [the party] or for similar official for such party analogous officer for the analogous officer for the official/analogous all or substantially all its or for all or any substantial party party officer assets parts of its assets under any bankruptcy, insolvency or similar law or any bankruptcy, insurance or similar law governing the operation of the party 8
ISDA EMA GMRA GMSLA 1992 / 2002 2001 / 2004 1995 / 2000 1995 / 2000 / 2009 6. Restructuring Yes Yes Yes Yes a) general assignment Yes Yes Yes Yes b) arrangement Yes No Yes (including coluntary Yes (including voluntary arrangement) arrangement) c) composition Yes Yes Yes Yes d) amicable settlement No Yes Yes Yes e) reorganisation No No (…the expression Yes Yes [Insolvency Proceeding] does not include a solvent corporate reorganisation ,) Sec. 5 (a)(vii)(3) Sec. 6 (1)(a)(viii)(7) Para. 2.(a)(i) 1992: Para.1.1.(a) 2000: Para. 2.1.(i) 2009: Para 2.1.1(a) 9
ISDA EMA GMRA GMSLA Derived from 1992 / 2002 2001 / 2004 1995 / 2000 1995 / 2000 / 2009 7. Possession Yes No No No a secured party has taken Taking/Enforceme possession of all or nt by a Secured substantially all its assets or Party of has a distress, execution, substantial all attachment, sequestration assets or other legal process, levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days (2002: 15 days) thereafter Sec. 5 (a)(vii)(7) 10
ISDA EMA GMRA GMSLA Derived from 1992 / 2002 2001 / 2004 1995 / 2000 1995 / 2000 / 2009 8. Furtherance of any of Yes N/A N/A N/A the foregoing acts or indicating its consent to, or approval of, or acquiescence in Sec. 5 (a)(vii)(9) 9. Event, which has an Yes Yes Yes Yes analogous effect to any causes or is subject to causes or is subject to any Para. 2.(a)(iv)(2nd HS): "…or 1995: Para. 1.1.(d)(2nd HS), of the events specified any event with respect to event which, under the laws similar relief" 2000: Para. 2.1.(iv)(2nd HS) above it which, under the of Specified Jurisdiction , 2009: Para 2.1.1. (d)(2nd HS): applicable laws of any has an effect which is Para. 2.(a)(vi): "…or similar relief" jurisdiction, has an analogous to any events "…(or any analogous analogous effect to any of specified in Nos. (1) to (8) proceeding)" 1995: Para. 1.1.(d)(2nd HS) the events specified in 2000: Para. 2.1.(iv)(2nd HS) clause (1) to (7) 2009: Para 2.1.1. (d)(2nd HS) "…or any analogous proceeding)" Sec. 5 (a)(vii)(8) Sec. 6 (1)(a)(viii)(9) 11
Issues Wrap-up 1. Dissolution and Corporate Reorganisation ( solvent corporate.. ) 2. Non Payment – Admits in writing 3. Filing and Presenting for insolvency: who? Where? Which Grace Period, if any? Exemption for inadmissible or frivolous filling ? 4. Petition for Restructuring – solvent corporate reorganisation ? 5. Enforcement by Secured Party 6. Catch all clause? 12
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