Rescue Plan Issues: Procedure and Structure; Distributional Issues

A business rescue in insolvency can be achieved in two ways: by either selling the business (usually an asset sale transferring the business as a going concern) or restructuring the business. Both options require cooperation—often within the parties of proceedings (creditors, debtor, management), but also with outsiders (investors, customers). Here, the need for cooperation in case of a sale is fairly limited in most jurisdictions because selling the business is simply a way to liquidate the debtor’s assets which may only require a qualified purchaser and a confirmation by a court or even by an administrator (usually an insolvency practitioner; see Chapter 7 for more details). Much more cooperation is usually required where a business must be restructured. If a plan does not only provide for the adjustment of old debt and security rights (financial restructuring), but also for an adjustment of vital credit lines, supply or employment contracts (operational restructuring), a larger number of stakeholders must be brought together.