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Private equity firms are becoming significant players in the mergers and acquisitions marketplace. Increasingly, buyers are interested in obtaining less than 100 percent of the target corporation and are also keen on using rollover equity to defer tax to the seller and provide additional financing for the buyer. Finally, buyers also wish to obtain a stepup in the basis of the assets of the target. A Type F reorganization involving a state law conversion of an S corporation into a limited liability company (LLC) can provide harmony between buyers and sellers in these transactions. This article will examine the technique and will offer practical guidance to practitioners. [ABSTRACT FROM AUTHOR]

Time-resolved X-ray photoelectron spectroscopy (TR-XPS) is used in a simulation study to monitor the excited state intramolecular proton transfer between oxygen and nitrogen atoms in 2-(iminomethyl)phenol. Real-time monitoring of the chemical bond breaking and forming processes is obtained through the time evolution of excitedstate chemical shifts. By employing individual atomic probes of the proton donor and acceptor atoms, we predict distinct signals with opposite chemical shifts of the donor and acceptor groups during proton transfer. Details of the ultrafast bond breaking and forming dynamics are revealed by extending the classical electron spectroscopy chemical analysis to real time. Through a comparison with simulated time-resolved photoelectron spectroscopy at the valence level, the distinct advantage of TR-XPS is demonstrated thanks to its atom specificity. [ABSTRACT FROM AUTHOR]

Accepted wisdom holds that secured creditors favor liquidation of a debtor in bankruptcy even where the debtor may be more valuable as a going concern. This is false wisdom, however. Holders of senior claims can be expected to favor liquidation prior to a debtor's bankruptcy because the return on such claims are capped by the amount owed while debtor asset values fluctuate. But bankruptcy is a day of reckoning that can eliminate a creditor's exposure to value fluctuation. For this reason, we expect that modern bankruptcy practice, with the secured creditor often firmly in control, does not unduly encourage liquidation. In fact, we expect any bias to favor reorganization, which can be manipulated for the benefit of any party in control of the bankruptcy process. Our results are consistent with this hypothesis. In a broad study of US corporate bankruptcy cases, we find that secured credit is positively and significantly correlated with the reorganization of insolvent debtors. [ABSTRACT FROM AUTHOR]

Purpose: Small- and medium-sized enterprises (SMEs) often lack adequate accounting systems and may even fail because of accounting inefficiencies. Indeed, accounting can mitigate the course of a crisis and support a troubled SME's turnaround. Its impact on reorganization success, however, has scarcely been researched so far. Therefore, this paper aims to examine the effects of several accounting parameters, namely, the quality of accounting systems, quality of early warning systems, formal planning, the standard of financial accounting and reorganization planning on the short- and long-term success of court-supervised reorganization. Design/methodology/approach: The impact of accounting on reorganization success is investigated in a sample of all SME bankruptcy cases with ten or more employees (n = 117) in Upper Austria in 2012 including data for short-term survival (in 2016) and long-term survival (in 2019). Findings: This study found evidence that the general quality of accounting systems, the quality of early warning systems and written reorganization plans positively influence the outcomes of the analyzed court-supervised reorganizations of SMEs. In particular, the existence of a reorganization plan significantly increases the short- and long-term reorganization success by ensuring the efficient and effective use of resources in the reorganization process. Practical implications: This study should increase the awareness of SMEs' owner managers, consultants, creditors and legislators for the importance of accounting in the context of reorganization. The fact that the effect of accounting on reorganization success is less pronounced in the long-term view indicates the necessity of increasing the strategic focus in SMEs' accounting instruments. Originality/value: This study provides new evidence on the impact of specific accounting parameters on the short- and long-term success of the court-supervised reorganization of SMEs. Furthermore, this study points out the high relevance of reorganization plans for SMEs. [ABSTRACT FROM AUTHOR]

To maintain future supplier competition, manufacturers may support financially distressed suppliers by sourcing from them, even if they are less efficient than competitors, and by procuring larger quantities from them at higher prices. We analyze these strategies in a model in which a manufacturer decides for one of two available suppliers, supplier bankruptcy risk is endogenous, and financial distress can lead to internal or external reorganization. Following bankruptcy, the remaining supplier may serve as a backup option. Our research identifies settings in which the manufacturer should support the distressed supplier. We also find that in some cases, a nondistressed supplier may charge price premiums due to its competitor's distress, while in other cases, it may use predatory pricing to drive its competitor into bankruptcy. We complement our results with a small case study and show how our model can explain patterns observed in industry. [ABSTRACT FROM AUTHOR]

Financially distressed companies are more likely to be rescued as going concerns if they enter into debt restructuring early whilst still high up on the 'demise curve'. In Hong Kong, early-stage non-consensual debt restructuring is effected via the scheme of arrangement. Yet, despite the similarities in the legislative framework, Hong Kong is less successful than the United Kingdom (UK) in using the scheme for early going-concern restructuring as the directors often invoke the scheme only when their company is far down the demise curve. We address the reasons for the difference based on the comparative outcomes of the schemes and interviews with insolvency professionals. Our results show that the reasons are attributed less to the differences in directors' duties in the zone of insolvency but the perception on how these duties are enforced. Urgent law reform is thus required to incentivise directors to address the problems early. [ABSTRACT FROM AUTHOR]

The article focuses on the changing landscape of insolvency practice globally with a shift towards restructuring systems that allow enterprises to continue operating and rewrite debt obligations. Topics include the challenges presented by limited restructurings that exclude many creditors, the approaches taken by the European Union and the U.S. to address the issue, and the convergence of recognition tests for single class restructurings between the two jurisdictions.

The article highlights the inaugural survey by the American Bar Association (ABA) Business Law Section on Chapter 15 of the U.S. Bankruptcy Code relating to cross-border restructurings. Topics include an informal judicial commentary regarding cross-border restructuring regimes and general rule of law principles, the key statutory provisions implicated under Chapter 15, a summary of the key cases that arose under the law, and an overview of specific components and procedures of Chapter 15.

Corporate governance in reorganization is an important guarantee for the success of troubled firms' rescue. Using a dataset of 93 listed companies in reorganization in China over the last 16 years and through a binary division of decision making in reorganization, the paper presents the first empirical study of governance in the manager management model and the debtor’s own management model during reorganization, found that the manager governance was plagued by the manager’s insufficient ability of business decision-making, which was difficult to improve the operating value of the enterprise; Under the self-management of the debtors, they were vulnerable to the manipulation of the controlling shareholder, and the allocation of losses from reorganization decision was unfair. This paper proposed to change the current model of the manager or debtor fully implementing the reorganization decision and business decision during the bankruptcy reorganization, and construct the dual model of mixed corporate governance for the manager to execute the reorganization decision and the debtor to implement the operation decision separately. The study provides a novel model for corporate governance in bankruptcy reorganization.

This study constructs an evolutionary game model of government, creditors, investors, and enterprises participating in bankruptcy reorganization, analyzes the strategy selection mechanism of the four parties under the government incentive mechanism, systematically analyzes the strategy selection process of each participant, discusses the effectiveness of government incentives in promoting the bankruptcy reorganization process, and finds out the stable point in the replication dynamic system. Finally, MATLAB 2018 software is used to numerically model the influence of key elements of the system. The research shows that under the government's incentive mechanism, creditors participate in bankruptcy reorganization in the form of debt-to-equity swaps, investors participate in bankruptcy reorganization in the form of providing high-quality assets, and enterprises participate in bankruptcy reorganization in the form of reform and transformation which is a stable strategy to replicate the dynamic system; the strategy of the enterprises will affect the strategy choice of creditors and investors; the completion of bankruptcy reorganization is inseparable from the government's incentives, and the government's strategy will directly affect the strategic choice of enterprises; and the government's support and constraint strength satisfy the following quantitative relationship: when M1>S3–C1 and L1>B1–C1, it can better promote the bankruptcy and reorganization process. [ABSTRACT FROM AUTHOR]

We study how innovative firms manage their innovation portfolios after filing for Chapter 11 reorganization using three decades of data. We find that they sell off core (i.e., technologically critical and valuable), rather than peripheral, patents in bankruptcy. The selling pattern is driven almost entirely by firms with greater use of secured debt, and the mechanism is secured creditors exercising their control rights on collateralized patents. Creditor-driven patent sales in bankruptcy have implications for technology diffusion—the sold patents diffuse more slowly under new ownership and are more likely to be purchased by patent trolls. This paper was accepted by Gustavo Manso, finance. [ABSTRACT FROM AUTHOR]

The Dniester River is the most important source of quality water in the Republic of Moldova. In the current difficult social-economic conditions, as well as the accelerated climate changes, the provision of quality water represents a primary imperative of public policies and a important direction of interdisciplinary studies. In this study were applied statistical, analytical, cartographic and comparative methods. In the analyzed period (2003-2020), the total volume of water used in the Dniester Hydrographical District was, on average, 759 million m3, including 670 million m3 (88%) in the Transdnestrian Region. For technological purposes was used, on average, 580 million m3 or over ? (76%) of the total volume of water used, for household purposes - 111 million m3 (15%) and for agricultural purposes - only 66.1 million m3 (8.7%), including for irrigation - 41.1 million m3 (5.4%). In the 2003-2020 years, the total volume of water used registers an oscillating dynamic. The maximum of water consumption in the 2007 and 2020 years are due to the manifestation of stronger droughts in these years. In the 2008-2016 years, there is a negative trend, which is due to the bankruptcy and reorganization of large agricultural companies and of Zonal Stations for Irrigation. [ABSTRACT FROM AUTHOR]

A stay of judicial or extrajudicial actions, as a result of opening the insolvency proceedings, aims to protect the competitive, collective and egalitarian character of the procedures regulated by law no. 85/2014 on insolvency prevention and insolvency procedures, thus avoiding the risk of individual actions to pursue or enforce creditors' claims on the debtor's assets and eliminating the uncertainty over the liabilities. This imperative legal norm, of public order, was appreciated as having as its purpose the concentration of all disputes with the debtor's property as its object, in the exclusive competence of the syndic judge appointed in the insolvency procedure. Creditors whose actions were thus suspended will have to declare their claims in the judicial reorganization and bankruptcy procedure. [ABSTRACT FROM AUTHOR]

Bankruptcy offers a fresh start that frees individuals from crushing debt burdens. Many insolvent Americans are, however, simply too poor to afford bankruptcy. Filing for even the simplest type of bankruptcy costs around $1,800, with most of this money paid to attorneys who help complete more than twenty required forms and schedules. These forms verify that the debtor qualifies for relief and help divide the debtor's estate among creditors, but for the large majority of debtors, this paperwork is unnecessary because the debtor easily qualifies for relief and has no assets to distribute. History offers a better model. Two centuries ago, the law granted release from debtor's prison through the simple execution of a "poor debtor's oath"--a short declaration that the debtor lacked substantial assets. For most debtors, modern bankruptcy law should require no more than an updated version of a poor debtor's oath that provides relief unless creditors or their trustees are willing to pay some cost to challenge the oath's validity. To discourage the wealthy from taking false oaths, Congress could sharply limit the exemptions available in the simplified procedure. Even dramatically smaller exemptions would protect all of the assets of the overwhelming majority of bankrupt debtors. By avoiding costly processes for debtors who obviously qualify for bankruptcy relief, a modern poor debtor's oath could save hundreds of millions of dollars in transaction costs each year and greatly expand access to bankruptcy. [ABSTRACT FROM AUTHOR]

This paper analyzes the impact of SMEs' entrepreneurial and learning orientation on the outcome of reorganization. We draw on a resource-based view on reorganization, linked with entrepreneurial and learning orientation. Previous research indicates a higher success rate of out-of-court reorganization compared to formal court-supervised proceedings. Out-of-court solutions are handled privately, therefore little is publicly known about the process of an out-of-court reorganization and what determines its success or failure. Thus, we focus on out-of-court reorganization, analyzing a sample of 521 Austrian SMEs. The data were collected from the financing banks. To test our hypothesized model of the impact of entrepreneurial and learning orientation on reorganization success, we applied bivariate analyses and logistic regression. The findings indicate that both entrepreneurial orientation and learning orientation positively influence the success of reorganization. While action-oriented entrepreneurial orientation probably has a stronger impact on short-term success, vision-oriented learning orientation seems to be more important for long-term turnaround. Company size acts as a moderator, indicating that small companies are less likely to succeed than microand medium-sized companies. The study has implications for corporate practice and future research. [ABSTRACT FROM AUTHOR]

We investigate the importance of public cash for modes of firm exit. Drawing on data from Slovenia, we assemble a firm-level panel that combines comprehensive records on public-sector cash transactions to businesses with exit and other information on more than 59,000 Slovenian firms. We then estimate a series of cause-specific, discrete-time linear survival models while addressing endogeneity concerns. As hypothesized, received public cash exerts a robustly negative effect on the prospects of liquidation bankruptcy and voluntary liquidation, but not involuntary liquidation. We do not find robust evidence of an average effect of public cash on the likelihood of reorganization bankruptcy or firm merger or split-up, although estimates of dose response functions reveal important heterogeneity of effects by treatment intensity. Cash originating with different public-sector entities is fully fungible. Our analysis offers novel insights into the role of the public sector for firm dynamics. [ABSTRACT FROM AUTHOR]

In this article, we ask how bankruptcy law affects the financial decisions of corporations and its implications for firm dynamics. According to current U.S. law, firms have two bankruptcy options: Chapter 7 liquidation and Chapter 11 reorganization. Using Compustat data, we first document capital structure and investment decisions of non-bankrupt, Chapter 11, and Chapter 7 firms. Using those data moments, we then estimate parameters of a general equilibrium firm dynamics model with endogenous entry and exit to include both bankruptcy options. Finally, we evaluate a bankruptcy policy change similar to one recommended by the American Bankruptcy Institute that amounts to a "fresh start" for bankrupt firms. We find that changes to the law can have sizable consequences for borrowing costs and capital structure which via selection affects productivity, as well as long run welfare. [ABSTRACT FROM AUTHOR]

Creditors often critically shape the fate of bankruptcy reorganizations, yet the drivers and implications of creditors' reorganization plan confirmations are still not completely understood. Exploring micro-level data on bankruptcy reorganization proceedings in Slovenia, we find that creditors, above all, demand a credible change in the exercise of control rights. The prospects of plan confirmation are positively associated with debt-to-equity conversion as well as those majority ownership changes that occur during the proceeding and feature a domestic incoming owner. In contrast, we find no evidence that plan confirmation is related to management turnover, majority ownership transfers involving a foreign incoming owner, pre-bankruptcy financial indicators other than leverage, the number of creditors, the value of different types of claims, and even the contractual details for the repayment of claims. The incidence of creditor-induced socially costly filtering failures is quite high, with estimates ranging between 41 and 78% based on the ex-post approach and between 40 and 61% based on the ex-ante approach. Confirmations of plans from non-viable businesses are more prevalent than rejections of plans from viable businesses. Our results provide a novel perspective on the creditors' role in the resolution of business bankruptcy. [ABSTRACT FROM AUTHOR]

This Article presents a new theory for analyzing bankruptcy-reorganization proceedings as well as a reorganization mechanism for public companies that may best meet legislative objectives: maximizing firm value and dividing it according to the claimants' legal priorities. Called Gordian knot theory, it suggests that there is a strong structural and material connection between reorganization stages, whereby bargaining and litigation between the claimants over the reorganization pie lead to progressive destruction of the firm's value and infringement on their legal rights. To demonstrate this theory, this Article focuses on reorganization's allocation and reallocation stages--where the claimants' original and new rights are determined, respectively-- and how the connection between them prevents the legislative objectives from being met. Alternative approaches suggested for attaining these objectives, including Roe's, Bebchuk's, Baird's, Aghion, Hart and Moore's, and Adler and Ayres' models, have focused on the firm's valuation problem and suggested solving it by market mechanisms. The Gordian knot theory suggests, however, that it is impossible to attain the legislative objectives strictly by determining the firm's value efficiently while leaving allocation problems to bargaining and litigation. This Article further presents a new mechanism for public companies that overcomes this problem by structuring reorganization in a single shot that includes the allocation and reallocation of rights, while eliminating the need for bargaining and court proceedings. It is based on a firm's going-concern warning that auditors have to issue, explicitly indicating that there is substantial doubt as to whether the firm could remain solvent over twelve months. Under this mechanism, the warning initiates twelve months of voluntary rehabilitation. Then, if the warning is still valid, the junior classes will be able to buy out all of the senior classes at a price of the latter's claims, similar to Bebchuk's options model. A successful buy erases the original debt and, if the claimants do not purchase the firm, it is considered insolvent. This Article presents this mechanism--called the reorganization without bankruptcy mechanism--and discusses its advantages: inter alia, in the pre-bankruptcy period, the firm is solvent, it has not breached its contracts, and it is not involved in complex allocation disputes. These advantages bring the reorganization process in line with the legislative objectives, and allow firms to achieve rehabilitation by allowing for funding based on market mechanisms and management's sole discretion, providing management with incentives for adequate disclosure, and initiating rehabilitation based on objective criteria--all free of bargaining and litigation biases. [ABSTRACT FROM AUTHOR]

We provide the first analysis of management turnover and ownership change as determinants of post-bankruptcy failure of small businesses. Examining micro-level data on Slovenian firms that attempted bankruptcy reorganization and utilizing multiple empirical approaches, we find that changes prior to completed reorganization proceedings never reduce, and in the case of foreign incoming owners or insider incoming managers in fact increase, prospects of firm liquidation. Firm liquidation prospects robustly decrease only with changes that occur after completed proceedings, involve ownership transfer, and feature domestic incoming owners. These results continue to hold under an alternative conceptualization of firm failure. Our findings are consistent with the importance of disruption costs in the process of turning around ailing small businesses. Our analysis casts novel light on the ongoing debate about the consequences of debtor-in-possession rule in bankruptcy and the relevance of successor origin in management turnover and ownership change for firm outcomes. [ABSTRACT FROM AUTHOR]

This article investigates the operation of voluntary administration in New Zealand from inception in 2007 to 2019. Voluntary administration is a formal insolvency procedure that is intended to maximise an insolvent company's chances of rehabilitation. Research undertaken for this article suggests that voluntary administration is not operating as was intended. It appears to have been underused and largely ineffective as a business rehabilitation mechanism. This article suggests that contributing reasons for the findings of the research include cost barriers for small businesses, a lack of confidence on behalf of creditors, and a misuse of voluntary administration by company directors. It proposes that useful reforms would be to reduce cost barriers and place limitations on when and how the procedure can be used. [ABSTRACT FROM AUTHOR]

Italy is about to enforce the first comprehensive reform of its corporate insolvency framework since the Second World War. The new Codice della Crisi d'Impresa e dell'Insolvenza builds on international recommendations, European laws and foreign best practice. One area that has been subject to substantial influence from foreign models is preventive insolvency mechanisms, where the Italian Legislator drew from the French and English experiences, as these countries have a widely recognized reputation of excellence in this field. Nevertheless, the similarities between the Italian and the English system – particularly with reference to the Italian panel of experts in the alert procedures and the English "pre‐pack pool" in pre‐packaged administrations – have so far been overlooked in the academic literature. This article sheds some light on the degree of cross‐fertilization between the Italian panel of experts in the procedure d'allerta and the English pre‐pack pool in pre‐packaged administration. The primary purpose of this study is to investigate whether regulatory reforms are needed to support the activity of the Italian panel in promoting restructuring deals for debtors in distress. [ABSTRACT FROM AUTHOR]

This article examines the general scope of application of the provisions on insolvency regarding members of a "group of companies", as included in Chapter V of the European Insolvency Regulation (recast) ("Recast EIR"), in order to review whether that scope is appropriate to deal with the different group structures in which business may be conducted. With the definition for a "group of companies" playing a paramount role in determining the scope of these provisions, the article includes a thorough analysis of the current definition for a "group of companies" as included in the Recast EIR. Based upon a teleological approach, the article argues in favour of an independent, broad and flexible interpretation of "group of companies", in order to include a large number of groups within the scope of the Recast EIR's provisions regarding group insolvencies. [ABSTRACT FROM AUTHOR]