Resolving Insolvency

Resolving Insolvency

Below is a detailed summary of the strengths and weaknesses in existing insolvency regulations in four areas: commencement of proceedings, management of debtor’s assets, reorganization proceedings and creditor participation.

This information was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 189 economies. The most recent round of data collection was completed in June 2014.

 

 

Answer

 

 

Score

 

Commencement of proceedings index (0-3)

 

 

     2.0

 

What procedures are available to a DEBTOR when commencing insolvency proceedings?

 

 

(b) Debtor may file for liquidation only

 

0.5

 

Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor?

 

 

(b) Yes, but a creditor may file for liquidation only

 

0.5

 

What basis for commencement of the insolvency proceedings is allowed under the insolvency framework?

 

 

(a) Debtor is generally unable to pay its debts as they mature

 

1.0

 

Management of debtor’s assets index (0-6)

 

 

3.0

 

Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the debtor?

 

 

 

No

 

 

0.0

 

Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts?

 

 

 

Yes

 

1.0

 

Does the insolvency framework allow avoidance of preferential transactions?

 

 

Yes

 

1.0

 

Does the insolvency framework allow avoidance of undervalued transactions?

 

 

Yes

 

1.0

 

Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of insolvency proceedings?

 

 

 

No

 

 

0.0

 

Does the insolvency framework assign priority to post-commencement credit?

 

(c) No priority is assigned to post-commencement creditors

 

0.0

 

Reorganization proceedings index (0-3)

 

 

0.0

 

Which creditors vote on the proposed reorganization plan?

 

 

N/A

 

0.0

 

Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as what they would obtain in a liquidation?

 

 

No

 

0.0

 

Are the creditors devided into classes for the purposes of voting on the reorganization plan, does each class vote separately and are creditors in the same class treated equally?

 

 

No

 

0.0

 

Creditor participation index (0-4)

 

 

2.0

 

Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency representative?

 

 

No

 

0.0

 

Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor?

 

 

No

 

0.0

 

Does the insolvency framework provide that a creditor has the right to request information from the insolvency representative?

 

 

Yes

 

1.0

 

Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting creditors’ claims?

 

 

Yes

 

1.0

 

Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice”.

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