Brexit – Implications for cross-border insolvencies and restructurings
26 February 2016
Issue in focus
English insolvency and restructuring procedures are well regarded on the global stage, and for good reason. English law provides a flexible, comprehensive restructuring and insolvency toolkit which is supported by the speed of access to, and the commercial attitude of, English judges. Creditors lending to foreign companies have frequently utilised English procedures and structured their financings to ensure that they are able to do so (e.g. choosing English governing law and jurisdiction clauses in the finance documents or shifting the centre of main interests of the borrower to the UK). The UK’s cross-border insolvency and restructuring regime has provided a solid, predictable backdrop for commercial counterparties when structuring cross-border deals and making investment decisions. One part of this attractiveness is the recognition afforded to certain English insolvency procedures across Europe.
Brexit, in whatever form, could have an impact on such recognition. Whether this impact would be severe enough to affect the decision to use English insolvency and restructuring procedures (i.e. the choice of England as the forum for such proceedings) is, in our view, unlikely. This is particularly the case given that one of the main tools in the toolkit (the English scheme of arrangement) is not covered by the European insolvency legislation in any event. However, it is possible that the uncertainty caused by a Brexit could cause parties to consider whether another European process or a US chapter 11 plan might lead to a better outcome.
This paper seeks to identify and analyse the potential impact of Brexit on the UK’s cross-border insolvency and restructuring regime and to help clients assess whether they should be taking any immediate actions in this regard. For the reasons given in this paper, the answer to that question is no. It should be noted that the post-exit model negotiated and adopted by the UK (and remaining EU Member States) is clearly fundamental to the analysis, and may change certain outcomes reached, in this paper.
This paper is one of a series of specialist Allen & Overy papers on Brexit. To read these papers as they become available, please visit: www.allenovery.com/brexit