Remedies for dealing with defaulting debtors have come a long way—physical bondage in ancient Babylon, sale into slavery in ancient Rome, and wage servitude of both debtors and families across many Eurasian and Middle Eastern legal systems were traditional punishments of defaulting debtors. Abhorrent debtor prisons, taking away freedoms, were not abolished across Europe and the United States until the mid and late 1800s.
Punishments were meted out whether the failure to repay arose because of misconduct or hard luck. There were some exceptions, the Code of Hammurabi (1780 BCE) permitting debtors to escape the harsher forms of punishment if able to establish debt defaults arose because of matters beyond their control. Similarly, many early religious texts provide for debt releases to the poor and unfortunate.
From around the 14th century, merchant-based debt defaults were dealt with somewhat differently, European lawmakers adopting Islamic mudaraba ideas, limiting the liability of individuals for defaulting debts of trading enterprises to the value of their original investment. England, eventually, developed the limited liability construct of a company to restrict personal liability of investors.
Over the past decade or so, the trade-off between fixing penalty on defaulting debtors of the “ill-luck” kind and the encouragement of entrepreneurial zeal to grow economic wealth has seen a lot of debate, planning, and law development put into framing laws to facilitate business renewal, restructuring support, and turnaround planning and results.
As global laws develop and we look to adopt the good in other systems and bring some comity between approaches, it is appropriate that the TMA’s Journal of Corporate Renewal asks leading practitioners around the world to speak about developments in local systems.
To begin, Christophe André and Lilas Demmou, of the OECD, based in Paris, provide a global perspective in a fascinating feature on reforming insolvency frameworks to facilitate economic renewal.
Although India is vast, its economic wealth is still driven by micro, small, and medium enterprises. Rocky Ravinder Gupta, president of TMA India, provides insight into India’s restructuring landscape by outlining the trends and challenges that have emerged since the implementation of the Insolvency and Bankruptcy Code 2016.
Providing a southern European perspective, Ivana Matic, with IM Consulting Ltd and president of the TMA Serbia Chapter, attributes success to Serbia’s pre-pack reorganization plan (PPRP). Ivana’s article sets out the process for PPRP, examining its merits and drawbacks and addressing key challenges in its execution.
Next, Lindsay Hingston and Michael Atkinson, with Freshfields, discuss some of the more interesting restructuring and corporate rescue situations, trends, and practices emerging in the U.K.
Much like the U.K., Australia is seeing a surge in restructuring, with insolvency appointments increasing by 47.98% compared to the same period in 2023. Mark Gillgren, James Hewer, and Adriano Poncini, of Clifford Chance Australia, discuss credit bidding as a restructuring and insolvency tool.
Next, Nathan Stubing and Kit Weng, with FTI Dubai, discuss the implementation of insolvency legislation in the United Arab Emirates that took effect May 1, 2024.
Lastly, we have Singapore, where Matt Becker, president of TMA Southeast Asia (SEA) and leader at Deloitte SEA, and Vera Lim, director of Deloitte Singapore write about the substantial role of the Chief Restructuring Officer (CRO) and rescue financing in Asia’s dynamic business market.
Uniformity of thinking, sharing of emerging ideas, and working together makes TMA such a strong thinking organization, its members acting as the architects and participants in further turnaround outcomes.
Amna Parvez, a lawyer with Clayton Utz, provided significant assistance in the guest editing duties for this issue of the Journal of Corporate Renewal.
