The system for managing corporate insolvency varies in fundamental ways between countries, with important effects on economic outcomes. Chapter 11 of the U.S. Bankruptcy Code forms the legal basis of the successful American regime, which can handle distress in a formal process without liquidating assets, closing businesses, and with limited job losses. Many countries aim to replicate key features of Chapter 11, such as a broad automatic stay on creditor action and senior financing during the reorganization. However, this reform process is slow and complicated, and has not, in our view, been generally successful. For example, the fact that large European firms still use the U.S. system suggests that European reforms have some way to go. …
Read the full article at: https://sites.duke.edu/thefinregblog/2023/12/14/non-financial-liabilities-and-effective-corporate-restructuring/