in ordinary times, but the challenges are amplified when many debtors cannot meet their obligations within a short stretch of time. Inaction or mismanagement in such circumstances can lead to substantial economic harm. The reforms advocated in this chapter are directed at strengthening courts so they can continue to function in a period of high nonperforming loans, capture the value of debt for economic recovery in the form of new investment, and provide individual debtors with a degree of protection.
Notes 1.
2.
3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.
In the aftermath of the 2007–09 global financial crisis, the Financial Stability Board created in 2011 the Insolvency and Creditor Rights Standard (ICR Standard) and designated it as one of its key standards for sound financial systems (FSB 2011). The unified global standard for insolvency is represented by two international instruments: the World Bank’s “Principles for Effective Insolvency and Creditor/Debtor Regimes,” first published in 2001 and periodically revised (World Bank 2021c), and UNCITRAL’s “Legislative Guide on Insolvency Law,” which was first adopted in 2004, with new “parts” added over time. See UNCITRAL Legislative Guide on Insolvency Law (dashboard), United Nations Commission on International Trade Law, Vienna, https://uncitral.un.org/en/texts/insolvency/legisla tiveguides/insolvency_law. The ICR Standard informs the findings in this Report because it is integral to helping countries further develop such systems. Terminology in this area can be confusing because different terms are used to describe similar processes in different jurisdictions. In this chapter, the terms insolvency and bankruptcy are used interchangeably to describe both liquidation and restructuring. Restruc turing can refer to both formal and informal (out-ofcourt) processes to reorganize a firm’s operations, finances, or both. Consolo, Malfa, and Pierluigi (2018); D’Apice, Fiordelisi, and Puopolo (2021). Araujo, Ferreira, and Funchal (2013). Fonseca and Van Doornik (2020). Lim and Hahn (2003); Neira (2017). See Acharya and Subramanian (2009); Araujo, Ferreira, and Funchal (2013); Dewaelheyns and Van Hulle (2010); Gamboa-Cavazos and Schneider (2007). Giné and Love (2006). Zombie firms are firms unable to cover debt servicing costs from current profits over an extended period. Andrews, Adalet McGowan, and Millot (2017); Banerjee and Hofmann (2018). Menezes and van Zwieten (forthcoming). Laeven, Schepens, and Schnabel (2020). Acharya et al. (2019). Menezes and van Zwieten (forthcoming). Menezes and van Zwieten (forthcoming). The issue of quantifying informal MSMEs is considered by Stein, Ardiç, and Hommes (2013) and International Finance Corporation, MSME Finance Gap (dashboard), SME Finance Forum, https://www.smefinance forum.org/data-sites/msme-finance-gap.
17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44.
45. 46. 47. 48.
World Bank (2017). van Zwieten, Eidenmüller, and Sussman (2020). Casey (2021). Agarwal et al. (2017); Bolton and Rosenthal (2002); Mukherjee, Subramanian, and Tantri (2018). Alston (1984); De and Tantri (2014); Guiso, Sapienza, and Zingales (2013); Kanz (2016); Mayer et al. (2014); Rucker and Alston (1987). Giné and Kanz (2018). Mayer et al. (2014). See De and Tantri (2014); Mukherjee, Subramanian, and Tantri (2018). Giné and Kanz (2018). Guiso, Sapienza, and Zingales (2013). G30 (2020, 3, 30). Ayotte and Skeel (2010). Calomiris, Klingebiel, and Laeven (2004). Cirmizi, Klapper, and Uttamchandani (2012); World Bank (2021b, 2021c, 2022). World Bank (2021c). The case is Bell Group (UK) Holdings Limited (In Liquidation) [2020] WASC 347. Laryea (2010). This was identified as a particular challenge in respond ing to the Asian financial crisis. See OECD (2001). Jappelli, Pagano, and Bianco (2005); Menezes and van Zwieten (forthcoming). Esposito, Lanau, and Pompe (2014). World Bank (2021c). More in-depth comparative analysis is available in Adalet McGowan and Andrews (2016). Chapter 3 annexes can be found at http://bit.do /WDR2022-Chapter-3-Annexes. See, for example, Gadgil, Ronald, and Vyakaranam (2019). See Menezes and van Zwieten (forthcoming). Menezes and van Zwieten (forthcoming). This measure, now ended, is summarized in AFSA (2021). Air Mauritius (2020). A watershed meeting describes the turning point at which critical decisions are made about the future of an insolvent business—in particular, whether it will undergo restructuring or proceed to liquidation. Via confirmation of a restructuring plan under Chap-ter 11 of the Bankruptcy Code (§ 1129). Corporate Insolvency and Governance Act 2020. Harris (2017). World Bank (2019b).
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