Selective Corporate Restructuring Strategy

This article engages with a fundamental, but under-theorized, fact: that modern corporate restructuring generally, and UK US specifically, are frequently processes in which only selected creditors impaired by the plan, treat of equal rank unevenly. selectivity stands contrast to foundational idea insolvency as collective process, individual creditors’ rights enforcement suspended for good general body creditors; all participate; proceeds realization assets distributed accordance distributional order priority prescribed law. Restructuring procedures certain debtor absorb loss while others ride through unaffected raise very different issues fairness from an procedure participate. Moreover, uneven treatment who would be law’s raises quite controversies over itself. Yet, few notable exceptions, selective strategies have received hardly any attention law scholars. We start premise – strategic decisions engage rather than negotiations, differential allocate losses unevenly among same rank, depending on their relative commercial bargaining power can often justified. Selectivity reduces direct costs limiting groups whose cooperation is needed reach agreement. And it indirect helping keep unimpaired board business future. However, there normative questions about boundaries within debtors ought able make use legal mechanisms treatment. Our first, sustained investigation nature facilitate strategies. In article, we review how operationalized four procedures: Part 26 schemes arrangement; 26A plans; company voluntary arrangements (‘CVAs’); connected party pre-packaged administration sales. Where relevant, draw explicit comparisons tools available chapter 11. We then develop menu relevant criteria distinguish legitimate illegitimate uses map our onto various 11, concluding some limited suggestions reform.