It was fantastic to be a part of a fascinating panel discussion at the recent ABI International Insolvency & Restructuring Symposium & Cross-Border Insolvency Program.
Our topic of conversation centred on the comparison of differences between centralised and decentralised cross-border proceedings, the factors that could contribute to taking either route and the potential challenges that each one presents.
For the former, where there is a main proceeding with related ancillary proceedings in other countries that are controlled by the same management and professionals (such as the recent airline cases of LATAM, Avianca and Philippine) it was universally agreed that cross-border coordination is key.
The variation in processes in Europe in particular mean that the failure to work effectively together can create a mismatch regarding terms of timings of processes commencing and, in some instances, result in conflicting objectives of the individual insolvency practitioners at a local level. Decentralised cross-border proceedings, where related entities in different jurisdictions have proceedings run by separate management and professionals, also run similar risks due to the independent nature of this approach.
The extent to which one process is chosen over the other can be driven by a number of factors, including the processes available in each of the jurisdictions and the extent to which such processes are debtor friendly. The way in which a business operates – central control versus decentralised operations – should also be front of mind, as well as the overall strategy for the restructuring, which could range from attempting to keep the entire business intact versus a more nuanced approach where the disposal of underperforming subsidiaries or potential carve-out opportunities are being explored.
In almost any scenario, though, effective communication and careful coordination remains the critical success factor. Through the upfront agreement of protocols, development of common information sharing platforms and, crucially, the early engagement of advisors, geographical borders can be heavily mitigated as barriers to a successful outcome.