International Restructuring

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 the interaction of different countries’ 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 our particular skills. Across other borders there are a range of other mechanisms, including local implementations of the UNCITRAL Model Law (as in the UK’s Cross-Border Insolvency Regulations 2006 or Chapter 15 of the US Bankruptcy Code).

Although 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 for such businesses is to seek early professional advice.

We can identify the issues and advise accordingly on appropriate remedies for cross-border financial distress, both directly and through our international alliances of insolvency professionals (insolvency co-operation partners), accountants (TIAG) and lawyers (TAGLaw).