Corporate insolvency responses in times of COVID-19

• Main Authors: Aurelio GURREA-MARTINEZ, BRODIE, Simon, MAHAJAN, Pooja
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2020
• Subjects: Commercial Law
• Online Access: https://ink.library.smu.edu.sg/sol_research/3466; https://ink.library.smu.edu.sg/context/sol_research/article/5424/viewcontent/Insolvency_Responses_in_Times_of_COVID19._World_Bank_and_INSOL.pdf
• Institution: Singapore Management University

Countries are responding to the Covid-19 crisis with a package of legal, financial and regulatory measures that include temporary reforms of their corporate insolvency frameworks. Common corporate insolvency responses adopted across jurisdictions include the suspension or restriction of creditors’ rights to initiate insolvency proceedings, as well as, where applicable, a suspension of directors’ duties to initiate insolvency proceedings and a relaxation of the liability for wrongful trading. Other corporate insolvency responses implemented around the world include: special rules for small companies; new measures to reduce the timing associated with the commencement and duration of insolvency proceedings; amendments to transaction avoidance rules; the facilitation of rescue financing; and, where applicable, the suspension of the subordination of loans by corporate insiders. Responses complementary to corporate insolvency implemented across jurisdictions include: the adoption of a moratorium against legal actions and the termination of contracts; the facilitation of workouts; and, where applicable, the suspension of the ‘recapitalise or liquidate’ rule existing in several jurisdictions. A number of judicial systems around the world are increasing the use of electronic communications to handle legal cases, including insolvency proceedings. Subject to various exceptions and limitations, various trends have been identified based on legal origin, region, and country income classification