Abstract
It is widely accepted that the goal of restructuring law for companies in financial distress is to minimise the agency costs of restructurings, which arise due to frictions from the relationships among the various stakeholders. In the last two decades, several jurisdictions around the world have reformed or are considering reforming their insolvency and restructuring laws in order to promote legal regimes that are conducive to restructuring of economically viable companies but in financial distress. Many jurisdictions, including significant economies in Asia, have court-supervised restructuring frameworks that are drawn from the United States (US) Chapter 11 of the Bankruptcy Code and/or the United Kingdom (UK) schemes of arrangement. In 2020, the UK has also amended its insolvency framework to allow a restructuring plan that is modelled on Chapter 11 but with modifications.

Using the case studies of four Asian jurisdictions, Mainland China, India, Hong Kong and Singapore, which have transplanted to various extends the US-/UK-style systems, I address the broader issue is whether transplantation is appropriate given the inherent agency costs that arise in the various stakeholder relationships are not identical to the US/UK. In particular, I examine the implications of the different share ownership structures on the design of insolvency and restructuring laws. Concentrated shareholdings in Asian companies are far more prevalent in the hands of families or the state.  In comparison, in US/UK, the ownership structures of large companies undergoing restructuring have been dispersed, though recent restructurings are increasingly dominated by firms which have private equity ownership.

In this talk, I focus on how the US/UK insolvency and restructuring regimes address the agency costs posed by their ownership structures and how these strategies have severe limitations in the context of Asian companies, where management is often either appointed by the controlling shareholders (and may not act in the creditors’ interests) or is not incentivised to share information with the creditors or insolvency practitioners. Yet to exclude controlling shareholders from the process is often not optimal since they can be vital to the success of the restructuring such as where they are significant creditors or provide financing or support, notwithstanding they may have been responsible for the debtor’s state of affairs. I argue that any transplantation or reform of insolvency and restructuring laws must take into account the impact of the differences in shareholding structures.

Biography
Wai Yee WAN is Associate Dean (Research and Internationalisation) and Professor, School of Law, City University of Hong Kong. Her main areas of research are in corporate law, mergers and acquisitions, securities regulation, financial consumer regulation and global restructuring and insolvency. Her research work centres on the optimal legal institutions and governance framework in order for securities markets to flourish. Her publications have appeared (or have been accepted for publication) in books and in international peer-reviewed legal journals, including American Journal of Comparative Law, Journal of Empirical Legal Studies, European Business Organisations Law Review and Journal of Corporate Law Studies. In 2021, at CityU, she has successfully obtained the Collaborative Research Fund award of HK$3.11 million for the project “Hong Kong Insolvency and Restructuring Law and Policy in Times of COVID-19 and Beyond” (as Project Coordinator).