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Out-of-Court Debt Restructuring

The enforcement of market exit must be an effective option at any time. Fair opportunity for rehabilitation. The insolvency law should facilitate opportunities for firm rehabilitation where supported by business judgments. In this regard, a number of features are key:. A legal stay on all creditor including secured creditor enforcement actions and a corresponding stay on payments by the debtor upon commencement of the insolvency proceedings are essential to avoid dismemberment of the operating units and dissipation of assets of a firm;. The insolvency law should facilitate new financing through according such financing with a legal priority before payment of pre-existing debt; and.

Discourage strategic behavior by creditors and debtors. In particular, the insolvency law should not displace or redistribute prebankruptcy negotiated entitlements, such as the priority of secured credit or the subordination of equity below unsecured claims. Also, the insolvency law should provide for review of suspect unfair transactions within a reasonable period and impose sanctions for such transactions.

Leverage out-of-court practice. In particular, the insolvency law should enforce prepacked restructurings negotiated out of court. Not discriminate between foreign and domestic creditors. Foreign creditors should generally be permitted to participate in the insolvency proceedings on the same basis as domestic creditors. Address cross-border dimensions. Insolvency proceedings of enterprises with assets and liabilities in different countries present potential conflicts among jurisdictions, resulting in inefficient delays.

These problems can be mitigated through the insolvency law incorporating generally accepted principles for coordination of courts and insolvency administrators among countries, in line with the UNCITRAL Model Law on Cross-Border Insolvency. Expectations of the operation of an insolvency law, however well designed, need to be qualified in the context of a financial crisis. As explained above, the insolvency law would be a limited tool in the crisis containment phase.

Furthermore, given that implementation of the insolvency law depends on the institutional framework, including judges and insolvency administrators and practitioners, the formal legal process and institutions can hardly if ever be expected to address the total volume of debt default cases that can arise after a crisis.

Rather, a more measured objective is to establish incentives through the law that would catalyze out-of-court restructurings, to the extent possible. Especially important would be a provision enabling a court in an expedited manner to make a restructuring agreement that is accepted by a qualified majority of creditors binding on dissenting creditors.

With the increase in the number and diversity of investors holding corporate debt, the ability to reliably bind-in holdout creditors has become even more critical to the success of restructuring efforts. Revision of other laws may need to be considered to support out of court debt restructuring in the aftermath of a crisis. These include corporate governance rules on the responsibilities of managers of a firm and the rights and liabilities of shareholders including limitation of liability of shareholders and the subordination of equity to unsecured creditors.

In addition, securities and tax laws may need to be addressed. Many countries have enacted reforms to their legal frameworks relevant to corporate debt restructuring over recent years, 21 but these laws may need to be re-tailored as a result of the changes to economic conditions resulting from a crisis. Although it could be argued that uncertainty created by law reform may stall debt restructuring while stakeholders await the outcome of the law reform process, this concern can be mitigated by advancing the law reform in the crisis containment phase during which the feasibility of debt restructuring is already limited.

In any case, any attempt to change the rules or practices for credit enforcement in the middle or aftermath of a crisis is sure to be met with heightened opposition in some quarters, especially as the potential winners and losers from the changes become apparent. Guidelines for out-of-court restructurings.

Parallel to reform of the legal framework, some degree of government involvement in supporting guidelines for out-of-court restructurings would facilitate wide scale debt restructurings. There is substantial international experience from which to draw. The so-called London Approach has influenced the evolution of government-sponsored guidelines for multicreditor out-of-court debt restructurings.

Under the leadership of the Bank of England, UK banks developed the London Approach as a set of informal guidelines on a collective process for voluntary workouts to restructure debts of corporates in distress, while maximizing their value as going concerns. The initiative grew from the recognition that creditors would likely achieve better returns through collective efforts to support an orderly rescue of a firm in distress, instead of forcing it into a formal insolvency.

For instance, in Indonesia, Korea, Malaysia, and Thailand, the London Approach was modified through enhancing the centralized role of government agencies to provide incentives for restructurings. Annex A identifies enhanced features of out of court workout frameworks adopted in a number of crisis situations. These principles build on the London Approach but without addressing some of the government enhancements that may be needed in crisis contexts :.

Second principle: During the standstill period, all relevant creditors should agree to refrain from taking any steps to enforce their claims against or otherwise than by disposal of their debt to a third party to reduce their exposure to the debtor, but are entitled to expect that during the standstill period their position relative to other creditors will not be prejudiced. Third principle: During the standstill period, the debtor should not take any action that might adversely affect the prospective return to relevant creditors either collectively or individually as compared with the position at the standstill commencement date.

Fourth principle: The interests of relevant creditors are best served by coordinating their response to a debtor in financial difficulty. Such coordination will be facilitated by the selection of one or more representative coordination committees and by the appointment of professional advisers to advise and assist such committees and, where appropriate, the relevant creditors participating in the process as a whole. Sixth principle: Proposals for resolving the financial difficulties of the debtor and, so far as practicable, arrangements between relevant creditors relating to any standstill, should reflect applicable law and the relative positions of relevant creditors at the standstill commencement date.

Seventh principle: Information obtained for the purposes of the process concerning the assets, liabilities and business of the debtor and any proposals for resolving its difficulties should be made available to all relevant creditors and should, unless already publicly available, be treated as confidential.

Eighth principle: If additional funding is provided during the standstill period or under any rescue or restructuring proposals, the repayment of such additional funding should, so far as practicable, be accorded priority status as compared to other indebtedness or claims of relevant creditors. Regard to the INSOL Principles remains a useful starting point in the design of out of court debt restructuring guidelines. However, where creditors are large in number, diversified beyond banks and include both domestic and international interests, coordination problems become more difficult to manage within a London Approach model: specifically, unanimous agreement among creditors and voluntary adherence to standstills can prove a major impediment to operation of out-of-court restructuring principles.

Conversely, where there are only one or two creditors for each corporate debtor, some of the formalities of a London Approach model, such as the establishment of creditor committees, can be unduly cumbersome. Furthermore, the application of the underlying London Approach model has been mixed in circumstances where the legal and institutional framework is less developed.

Advancement of voluntary payments standstills. One dimension in which further innovation in the out-of-court restructuring models may be needed is with respect to catalyzing voluntary payment standstills. While the principle of a standstill on debtor payments and creditor enforcement is enshrined both within best practices for out-of-court restructurings and formal insolvency law, resort to case by case negotiated standstills or court imposed standstills may not be sufficiently feasible where a substantial proportion of the corporate sector is in distress.

Additional tools may be warranted in extreme circumstances where the liquidity needs of the corporate sector are severe in countries undergoing the crisis containment phase, i. The objective would be to provide corporates relief from liquidity pressures and avert firms from failing during the crisis simply as a result of the freezing of credit markets. Consideration could be given to the design of a framework for voluntary standstills, in which the government incentivizes creditor participation in the standstills, e.

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This approach, however, would not be a substitute for macro policies to foster new lending. The approach would be intended to mitigate the inefficiencies of individually negotiated standstills that can arise with workout guidelines and to forestall consideration of government-imposed payment moratoria in extreme cases.

The envisioned government-facilitated voluntary standstills could operate in the crisis containment phase, as a precursor to individually tailored standstills based on workout guidelines or debtor specific court-imposed standstills under the insolvency law that could be appropriate in the debt restructuring phase. Conditioning the operation of government facilitated standstills on the assessment of individual firm viability would not be practicable during the crisis containment phase. Payments subject to the government-facilitated voluntary standstill would not be legally written off, but would only be deferred, by agreement, to after the standstill ends.

Accordingly, such a voluntary standstill would not determine the ultimate fate of the firms— this would need to be addressed in the second stage debt restructuring phase after the standstill. For some firms, the liquidity preserved through the standstill may be sufficient to enable them to emerge from the crisis as going concerns; for others, a subsequent debt and organizational restructuring will be needed; and for yet others, liquidation through the bankruptcy law would be the value-maximizing alternative.

While attractive in principle, design of a framework for such government-facilitated voluntary standstills is difficult. With this caveat, the following design elements merit consideration:. Voluntary —Participation would be voluntary for each corporate debtor and its creditors. However, conditioning government financial support on the acceptance of the standstill by a qualified majority of relevant creditors would mitigate creditor free rider problems, by reducing the opportunity of holdouts to benefit from the forbearance of other creditors.

In contrast, forced participation through, e. Scope —Participation in the government-facilitated voluntary standstills should be open to a wide spectrum of the liquidity-constrained corporate sector and their creditors. While eligibility should be widely cast, qualification for the standstill in each case would be determined by creditor agreement. Payments subject to the standstill need to be sufficiently comprehensive to give meaningful liquidity relief to the corporate sector. Exclusion of payments on trade financing and short term working capital may be acceptable to other creditors, in the interests of preserving the core operational capacity of the debtor firm.

Temporary —An indefinite standstill would be unacceptable to creditors and would risk deferring the second-phase debt restructuring that would need to be conducted as soon as is feasible.

Jesse Schreger: The Cost of Sovereign Default

A time period of 6 months with possibility of limited extension may strike the right balance to allow sufficient time i to rehabilitate the banking sector and for macro policies to take hold; and ii to afford creditors the opportunity to advance assessment of the viability of the respective corporates by professional advisors. However, in order to provide some degree of discipline on debtor behavior against dissipating assets during the standstill period, creditors would need to be able to agree to lift the standstill at any time.

Incentives —To the extent that fiscal space permits, some government financing of working capital for participating corporate borrowers would be conducive for debtors and creditors. Also, participation may present creditors with the near term advantage of improving the liquidity of their debt instruments, where tradable. Downside risks of non-participation include unpredictable and lengthy bankruptcy procedures resulting in further value destruction which might otherwise be avoided.

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Focused legal and institutional reforms —Positive expectations of an orderly exit would enhance effectiveness of the standstills. Accordingly, during the standstill period, reform of the corporate insolvency laws should be focused on facilitating prepackaged restructurings that could emerge after the standstill period; specifically, to allow a qualified majority of creditors to be able to bind a dissenting minority to a restructuring agreement.

In addition, governments should take the opportunity during the standstill period to advance guidelines for out-of-court restructurings. Other Government involvement in new financing. One potential line of government intervention is in reform of the insolvency law to induce new financing by maximizing alternatives for according such financing with a legal priority in payment ahead of pre-existing debts. Should governments instead substitute for private credit markets and provide new financing on terms within the reach of viable firms?

Unlike new financing from the private markets, demand for government financial support of individual firms may be highest in the crisis containment phase where determination of individual firm viability is elusive—In that context, the preceding discussion of limited government financing to facilitate standstills seeks to articulate a circumscribed framework with objective criteria.

Absent such criteria, a risk is that ad hoc decision-making in selective government financing to individual firms would politicize eventual debt restructurings and add to market uncertainty potentially beyond the span of the crisis. Differing intervention with respect to SMEs.

First, given the sheer number of SMEs, the banking and court systems are unlikely to have the capacity to efficiently restructure distressed SME debt on a case by case basis. Separate frameworks for resolution of SME debt may include government-imposed standard restructuring terms through, e.

A Brief Overview of Recent Legislative Changes in Serbia Relevant for Debt Restructuring

Government guarantees could be used to facilitate new financing by banks under defined circumstances. Government financing directly into the SME sector may be warranted where banks are unreliable or inefficient agents for channeling financing. While corporate debt workout is in the longer-term interest of banks, they must first support their own viability and establish loss absorption capacity. The drain on bank capital due to the first wave of a crisis, coupled with the existence of a number of creditors that require some degree of debt restructuring may lead to curtailment in lending to both viable and non-viable firms thus exacerbating the impact of the crisis.

Banks tend to prefer a market-based system of debt restructuring in order to avoid costly court-based bankruptcy procedures. Coordination failures and externalities may inhibit progress. Bank recapitalization, involving some use of public funds, has been a common feature to restore capital depleted by widespread corporate defaults and to allow banks to take longer term rational decisions on corporate debt restructuring.

Subjecting the injection of public funds to some degree of corporate debt restructuring could be considered, provided that introduction of such feature does not delay bank restructuring. Some additional government measures to promote bank restructuring and support the role of banks in corporate debt restructuring include:.

Government support for setting up specialized advisory and investment banking services to facilitate negotiations between banks and corporations and minimize coordination problems; Offering tax and other financial incentives to banks including to AMCs, see below to expedite out-of-court debt restructuring; Using supervisory powers to require banks to disclose claims to relevant negotiating parties; lack of transparency could otherwise delay outcomes of debt negotiations;.

Defining a clear and concise timetable for various stages of the debt workout process. To achieve maximum participation from both sides and minimum disruption along the way, supervisory penalties for non-compliance could be imposed. The cross-border dimensions of bank operations may complicate the design and implementation of government intervention. Capacity to exercise regulatory suasion over foreign banks and their affiliates may be limited—e.

Where public financial support to the banking system is related to debt restructuring programs relieving the industrial or household sectors in one country, burden-sharing these costs among governments can present a major unresolved challenge. However, the presence of foreign participants in the banking system can in certain circumstances support debt restructuring by enhancing financial resources and technical expertise that can be put into the debt restructuring effort.

Asset Management Companies AMCs have been used to spearhead the restructuring of corporate debt with a view to maximizing asset recovery and supporting rehabilitation of viable corporates overtime as well as to support the recovery of the banking sector through transferring out bad assets, causing banks to recognize losses and allowing banks to focus on their core business. Where AMCs are established to manage assets from open rather than closed banks the price for removing the assets is a critical operational issue that can delay restructurings where banks seek to avoid marking down their assets or transferring potential upside to a third party.

AMCs have proved relatively more effective in corporate debt restructuring episodes when there are a large number of troubled corporations, relatively homogeneous loans, or where AMCs bring specific restructuring expertise unavailable in the banks. Openness to leveraging international technical expertise to bolster local experience is also a comparative lesson for the effective use of AMCs.

In terms of their institutional structure, AMCs could be government-sponsored, private, and hybrid. In general, the choice of a particular structure depends on a number of factors, including types of assets, magnitude of the problem, depth of markets, and characteristics of debtors. Experience with government-sponsored AMCs has been mixed due to difficulties in balancing their conflicting public and market objectives. The effectiveness of government-sponsored AMCs is enhanced by subjecting their operation to clear sunset clauses.

The case for government-sponsored AMCs is relatively stronger when the size of the debt restructuring problem is acute relative to the capacity of the private sector or special legal powers are needed to promote debt restructuring. Private AMCs, particularly where compensation structures are aligned to maximizing value in the recovered assets, tend to execute their functions more efficiently. However, where banks establish their own private AMCs, reliance on these vehicles should be assessed with caution by regulators given the risk that they be used by banks to cover up problems on their balance sheets.

Notwithstanding some of the attractive features of private AMCs, funding for such operations can be constrained during, or following crises. An innovative way of approaching asset management could be through hybrid public-private AMCs, leveraging both public and private resources and expertise. Thus far in the current crisis, reliance on AMCs has been limited. The following principles merit emphasis in tailoring the design of a comprehensive corporate debt restructuring strategy to country circumstances:.

The sequencing and relative prioritization of policy measures relevant to a debt restructuring strategy will need to evolve over the course of a systemic crisis and its aftermath. While it is important that a comprehensive debt restructuring strategy be envisioned at an earlier stage, concerted implementation of that strategy cannot be realistically sustained during the height of a crisis. However, given that changes to insolvency laws and the underlying institutional structure take time to effect, country authorities need to begin diagnosis of the debt problem and to anticipate the legal bottlenecks at an early stage.

Furthermore, the onset of a crisis could present an opportunity for the authorities to galvanize relevant stakeholders into reform mode.


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Early and credible government commitment to engage in this process can reinforce positive expectations of market participants. Such expectations must, however, be managed since wide scale corporate debt restructurings in a wake of a crisis may take many—often difficult—years. Rehabilitation of the financial sector is a first order priority. Specifically, banking system dislocation must be contained and banks need sufficient capital to revive lending and to be in a position to restructure debt in the subsequent restructuring phase.

In order to move the process forward, governments would likely need to step in to enforce timely recognition of losses and to recapitalize banks, where shareholder recapitalization is not feasible. A path towards macroeconomic stability is critical. Debt restructuring can reinforce macro policies. But reasonably predictable asset prices, interest rates, and exchange rates are needed to enable debtors and creditors to make medium term judgments of viability required for restructuring on any sustainable scale.


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While insolvency law is needed—and reforms should be advanced where possible during the crisis containment phase—insolvency law is no substitute for macro policy responses. Where feasible, reform of the insolvency and other related laws should focus on provisions to support out of court restructuring. In particular, enabling a court in an expedited manner to make an out-of-court agreement that is accepted by a qualified majority of creditors binding on dissenting creditors is key; as are provisions to support new financing by according it with a legal priority in payment.

In extreme cases, government financing to facilitate voluntary standstills on payments could be a useful interim measure in the crisis containment phase, prior to wide scale debt restructuring. Governments could provide limited financial support for working capital as an incentive for temporary standstills agreed between corporate debtors and their respective creditors that would preserve liquidity in the corporate sector while the ground work for debt restructuring is laid.

While all country experiences of wide scale debt restructuring have been mixed, some government intervention moderated to complement case by case negotiations tends to be relatively more effective. A different mix of tools may be needed with respect to SMEs, which may call for more across the board treatment—but caution should be exercised against throwing financing at non-viable SMEs in the face of reduced consumer demand. The debt restructuring strategy should respect inter-creditor equity and avoid targeting foreign creditors. The longer term effects of disruption in financial relations resulting from a crisis could be exacerbated by debt restructuring strategies that overturn predetermined rights such as the priority ranking of secured creditors.

Furthermore, the targeting foreign creditors in debt restructuring strategies would be short-sighted in view of the longer term access to international credit and investment needed to sustain post-crisis economic recovery. Government-sponsored out of court workout guidelines are conducive to maximize debt restructuring for viable firms.

To be optimal in the aftermath of a crisis, such guidelines will likely need to operate in a structured framework involving government enhancements, such as regulatory suasion on banks to sign on to the workout principles. AMCs may help to spur corporate debt restructuring. However, the establishment and operation of AMCs present a number of design challenges, in terms of governance structure and pricing of assets. Consideration of AMCs is particularly warranted where the financial and technical capacity of banks are insufficient to address corporate debt restructuring reliably.

Liquidation of non-viable firms cannot be avoided. Firms exposed as non-viable should be eased out of the market place through speedy liquidation procedures and their assets recycled to more productive use in the economy. Government intervention directed to salvaging non-viable firms would present an undue drag on public finances and on the efficient recovery of the economy.

Risks to public finances from government intervention in debt restructuring should be contained. The scale of financial distress in the corporate as well as banking and household sectors and the unreliability of market-based solutions alone, imply that some government financial support for debt restructuring would be inevitable.

However, fiscal space limitations cannot be overlooked. A well-designed intermediate approach would leverage private capacity to burden share between debtors and creditors, and conserve use of limited government financial resources. Contact: Tlaryea imf. Acknowledgments are also due to Manfred Balz and Sijmen de Ranitz who commented on the paper in draft. See Article V, Section 3 a. Most of the country cases that have been the subject of systematic study arise in the emerging economies.

In contrast, corporate debt restructuring in some advanced economies may to a greater degree encounter issues of financial innovation, such as the restructuring of debt embedded in structured financial products or covered by credit default swaps, which are not specifically addressed in this note. Furthermore, the idiosyncrasies of restructuring of debt of quasi sovereign entities, as has been highlighted in the recent or on-going restructurings of Naftogaz Ukraine and Dubai World—and which straddle corporate and sovereign debt restructuring principles—require specific analysis and are not addressed herein.

The common characteristics of these country cases were: i virtually all corporate and household debt was held by domestic banks and most, if not virtually, all the corporate debt was in domestic currency; ii legal reforms focused on improving insolvency procedures and removing impediments to corporate debt restructuring, such as strengthening collective rights of majority creditors; and iii the immediate fiscal costs ranged from 6 percent of GDP Poland to 20 percent Korea and 44 percent Thailand financed mainly by the issuance of government bonds.

Classification of the Korea and Thailand debt restructuring strategies are borderline between case by case or intermediate. The approach adopted by the Argentine government during the debt crisis is analogous.

Introduction

In addition, the government introduced an asymmetric indexation of assets and liabilities, under which deposits were indexed to the CPI, while certain loans were indexed to wage inflation. Also, legal challenges by depositors followed, with some successful in obtaining court orders releasing deposits at market exchange rates. The common characteristics of these cases were: i the corporate sector carried high levels of both domestic and foreign currency debt, with government involvement aimed mainly at the foreign debt; ii the complexities of the balance sheets led to the creation of several government led mediation entities, as well as schemes for direct corporate debt relief; iii legal reforms to bolster the credit enforcement institutions and culture were pursued, but with mixed results; and iv there were nonetheless sizeable fiscal costs 20 percent for Mexico and 55 percent for Indonesia , financed by government bonds.

For example, in Indonesia, an across-the-board approach was implemented for the restructuring of SME debt held by IBRA, whereas the approach for larger corporates was intermediate. The Model Law focuses on i access to courts by foreign country insolvency administrators; ii determining when legal effect would be given to a foreign insolvency proceeding; iii clarifying procedures for cooperation among insolvency proceedings and administrators; iv specifying rules for coordination between concurrent insolvency proceedings; and v establishing rules for coordination of relief granted in different insolvency proceedings.

More generally, the level of confidence in government institutions due, inter alia, to perceptions of corruption, may also affect the capacity of parties to rely on the legal and institutional framework for credit enforcement at the best of times and not least, within a crisis. Use of majority restructuring clauses in corporate bonds may also facilitate out of court restructurings of in those debt instruments.

For example, limitations in securities laws on debt-to-equity conversions or issuance of new equity instruments may need to be relaxed. Reconsideration of aspects of the insolvency law, such as the priority ranking of creditors, is likely to be especially contentious. The recent change to the Iceland insolvency law to provide depositors with a priority ranking over ordinary creditors is a notable example, albeit in a bank insolvency context.

In the classic London Approach, the Bank of England played a critical role in encouraging and overseeing participation by bank creditors. In Indonesia, e. On balance, the JITF framework was relatively successful. In the absence of a credible legal and judicial system and within a difficult legal environment, it provided a reasonably predictable forum for restructuring. In addition, the Indonesian Bank Restructuring Agency IBRA was established to restructure and recapitalize banks, maximize recoveries from taken-over assets, and support corporate debt restructuring. While IBRA worked well in stabilizing the banking system, it performed less well in maximizing asset recoveries, and its role in supporting corporate restructuring was decidedly mixed.

The relative success of the original London Approach was anchored in a reasonably predictable UK legal framework on the enforcement of creditor rights and a culture of cooperation with and trust placed in the role of the Bank of England by all parties involved. Looking back at this experience, it indicates that the oversight role of bank regulatory authority was an important factor in overcoming collective action problems among bank creditors. Where their mandates and policies permit, international financial institutions could potentially play a role in contributing to such financing.

While government-imposed payment moratoria would in principle give corporate debtors temporary relief from systemic liquidity pressures, such measures would give rise to economic distortions and cannot substitute for necessary debt restructuring. Legal limitations e. Furthermore, to the extent that payment moratoria constitute a restriction on the making of payments and transfers for current international transactions, they would entail an exchange restriction subject to IMF approval.

Chapter XI reorganization proceedings. For example, the proliferation in financing agreements of negative pledge clauses that restrict collateralized new financing has been noted as complicating negotiation of new financing in debt workouts. Although, Japanese law unlike the U.

For example, while U. While DIP financing in the United States is reported to have somewhat rebounded during the latter part of , it has become more expensive relative to pre-crisis times. A further factor adding to the difficulties companies face in obtaining DIP financing in the United States has been the highly leveraged position of many companies prior to the crisis, so that when they fall into trouble there is often limited collateral remaining which can be pledged as security for DIP financing.

For example, this concern has been highlighted in the arguments of secured creditors, who were effectively subordinated to unsecured creditors, within the government financed rescue of Chrysler and General Motors. Notably, the U. Treasury and Export Development Canada to fund the Fiat Transaction is a political issue that is motivated, in part, by noneconomic considerations. The Governmental Entities have made the determination that it is in their respective national interests to save the automobile industry, in the same way that the U.

Treasury concluded that it was in the national interest to protect financial institutions. Although the short term public revenue considerations may be particularly pressing in the aftermath of a financial crisis, addressing those considerations through use of an insolvency law as a tax collection mechanism may be problematic in the longer term. In particular, provisions in insolvency law that give per se priority to the recovery of domestic tax clams over other unsecured creditor claims can contribute to complacency and inefficacy of the tax authorities in general tax collection.

Furthermore, the presence of the tax authorities as a priority-ranked creditor, with limited orientation towards advancing timely rehabilitation of viable firms, would tend to delay debt restructurings and dampen incentives for other creditors to engage proactively in early resolution of the debt problems. A substantial part of the study is devoted to the analysis of the enabling regulatory environment for out-of-court restructuring. It is evident that debt restructuring does not operate in a vacuum: in fact, the general legal system influences and to a certain extent determines the possibilities for debt restructuring in any given jurisdiction.

The study provides a checklist that can be used to examine the features of a legal system that bear a direct influence on debt restructuring activities. The different characteristics of informal restructurings, and of enhanced and hybrid debt restructurings are covered by the study. The different approaches to debt restructuring aim at combining the advantages of an informal approach with the advantages of formal procedures: especially, the existence of a moratorium on creditor actions and the binding effects of creditor agreements concluded within the insolvency process.

A Brief Overview of Recent Legislative Changes in Serbia Relevant for Debt Restructuring

About The Author. Background to OutofCourt Debt Restructuring. Informal Workout Procedure. Decentralized and Centralized Approaches.