Many businesses have assets, liabilities, operations, owners or investors in different countries.
When insolvency threatens, you must assess the values and risks of these foreign connections, and the local and international laws and practices that apply to them.
Financial distress can often be overcome, but the challenges it presents when a company operates in more than one country multiply rapidly. It is common for businesses to establish local companies to operate in other jurisdictions, although there are many situations where companies operate abroad through branches.
The obvious restructuring issue is the effect of different countries’ interacting insolvency laws on the company. Although in principle most countries have an insolvency system designed to maximise returns to creditors from the value in the company, the detail of the way this is done varies hugely. Increasingly, international law is moving to enhance cross-border insolvency co-operation between branches and also between group companies.
Within Europe there is a European Insolvency Regulation designed to facilitate co-operation between insolvency regimes in such circumstances. Using such European legislation in conjunction with local insolvency law and practice is one of Mercer & Hole’s particular skills.
Cross border insolvencies are not uncommon. Sometimes there is – as in any case of financial distress – an opportunity to rescue the company. Many jurisdictions have pre-insolvency procedures or practices to facilitate turnaround and rescue even when a company has run out of cash and has a balance sheet deficiency. As ever, the key is for such businesses to seek early professional advice.
Cross Border Restructuring Advice
Chris Laughton, who heads our international insolvency services, is a leading Insolvency Practitioner in this field and is a past President of INSOL Europe, the European organisation of professionals who specialise in insolvency, bankruptcy and business reconstruction & recovery.
Specialist advice is essential if you are faced with cross border insolvency and Mercer & Hole can provide this service either:
directly through Chris and other members of our team, who can identify the issues and advise on appropriate remedies; or through our international alliances of insolvency professionals (insolvency co-operation partners), accountants (TIAG) and lawyers (TAGLaw).
We are particularly experienced in acting for foreign entities with UK interests in financially distressed or insolvent businesses.