High Court Tightens Section 546(e) Safe Harbor for Securities Transaction Payments

Proposed UNCITRAL Model Law on Enterprise Group Insolvency

In December 2018, at its 54th session in Vienna, Working Group V (Insolvency Law) of the United Nations Commission on International Trade Law (UNCITRAL) discussed revisions to its Enterprise Group Insolvency: Draft Model Law (the "EGI Model Law") as well as the EGI Model Law’s Guide to Enactment.

The EGI Model Law is intended to govern the conduct and administration of insolvency proceedings involving enterprise group members that may be pending in several different countries. It is designed to complement the Model Law on Cross-Border Insolvency (the "CBI Model Law"), which has now been adopted in some form by 44 nations or territories, including the U.S., in chapter 15 of the Bankruptcy Code (enacted in 2005). The CBI Model Law establishes a framework for cooperation and coordination among courts presiding over cross-border bankruptcy and insolvency proceedings. The draft EGI Model Law and the CBI Model Law adopt the same format (in terms of structure and terminology) as the new Model Law on the Recognition and Enforcement of Insolvency-Related Judgments (the "IRJ Model Law"), which UNCITRAL published in its final version on September 18, 2018. A brief summary of the IRJ Model Law is available here.

Unlike the CBI Model Law, the EGI Model Law focuses more on multiple insolvency proceedings involving multiple debtors that are members of the same enterprise group, rather than cross-border proceedings involving a single debtor.

The topics discussed by the Working Group included:

  • The term "group insolvency solution," which can include the reorganization or sale as a going concern of the whole or part of the business assets of one or more of the enterprise group members.
  • The term "planning proceeding," by means of which a group insolvency solution is to be developed, coordinated, and implemented. Planning proceedings may be pending in more than one country, and the courts of one country may "recognize" a foreign planning proceeding in much the same way that courts may recognize foreign main and foreign nonmain proceedings under the CBI Model Law. A planning proceeding is a procedure whereby a representative for the member group companies will be appointed to oversee the formulation and implementation of an insolvency plan (i.e., a rescue procedure or restructuring plan) subject to court approval. Such a plan need not have unanimous creditor consent to be implemented.
  • Forms of relief that may be available either after a court recognizes a foreign planning proceeding or at the time an application for recognition is filed, including: (i) injunctive relief to preserve an enterprise group member’s assets; (ii) discovery; (iii) financing of group member operations; and (iv) additional relief that may be available to a duly appointed liquidator or administrator.

At the December 2018 meeting, the Working Group approved the substance of the draft EGI Model Law as well as the draft Guide to Enactment. Additional discussions concerning the draft law and guide will take place in May 2019 during the Working Group’s 55th session in New York City. The final text of the EGI Model Law is expected to be published at the end of 2019, after which it can be implemented.

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