Asset Sales in Corporate Reorganisation:current situation and future development

On both sides of the Atlantic, there is an increasing trend to employ formal corporate rescue procedures to achieve going concern sales of troubled businesses. In particular, achieving business sales through a formal insolvency procedure in an expedited manner prior to the approval of reorgnisation plan has gained considerable popularity in insolvency practice both in the UK and the USA in the last two decades. Arguably, the accelerated approach to business sales respond to a need to develop a more flexible and accommodating approach in dealing with corporate distress. It, nevertheless, has led to concerns that the formal rescue-oriented procedures have shifted toward excessive liquidation of financially distressed companies, since significant transactions greatly limit possible options for plan formulation. This development has also intensified concerns about potential abuses by parties attempting to game the system to benefit themselves. Thus, it has given rise to a growing debate about the right balance between procedural efficiency and protection of creditor interests. This article presents a comparative examination of the phenomenon of the increased use of the main rescue procedures for going concern sales in an expedited manner in their respective main rescue procedures in two key insolvency jurisdictions, and critically evaluates the makeshift safeguards provided toameliorate the concerns and safeguard against self-dealing and abuse