Since the 1997-1998 Asian financial crisis the World Bank has focused its initiatives on improving the future stability of the international financial system, as well as the development of principles and guidelines for sound insolvency systems. One of this century’s first products was the launch of Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. They serve as a diagnostic tool in the World Bank’s programme of individual country assessment. These Principles have provided to individual countries a fair and acceptable basis for evaluating their insolvency laws.
A recent initiative is a study to collect data on how various jurisdictions treat the legal position of shareholders. Around the globe the interaction between insolvency law and company law has gained the attention of policymakers, legislators and legal commentators due to forum shopping and regulatory arbitrage in corporate insolvency. These latter developments have increased tension between the rights of shareholders, creditors and, in general, company law and insolvency law. This increasing tension has become subject of a large research project jointly led by the World Bank and the Banca d’Italia. The research is developed by the Community of Practice on Insolvency and Creditor/Debtor Regimes (the ‘CoP’) and it has recently launched a survey as the first stage of the project. This survey is based on a questionnaire that should allow the CoP to collect data on how various jurisdictions treat the legal position of shareholders of companies in the vicinity of insolvency.
The purpose of the questionnaire is to identify how this position is affected in a crisis scenario and to identify the interaction between shareholder rights and the normal operations in either a liquidation or a reorganisation process. The questionnaire is designed to analyse the conflicts between insolvency law and company law and the focus will be on two principal areas of conflict, namely the individual rights of shareholders and the role of the shareholders’ meeting in an insolvent company. The main issues that can be distinguished within those two principal areas of conflict are (i) the respective powers of the board and the shareholders’ meeting in insolvency proceedings; (ii) the substantive and procedural rights of shareholders in a company subject to insolvency proceedings; (iii) the possibility of using the old/same corporate entity as a vehicle for the reorganisation of the company; and (iv) the possibility of the shareholders retaining a participation in the reorganised company, and, if they are allowed to retain a participation, the allocation of value between creditors and shareholders.
The CoP has assigned the task of responding to or organising the collection of responses to the survey to national coordinators. For the Netherlands, Professor Bob Wessels of the Leiden Law School and Professor Michael Veder (Radboud University of Nijmegen) have been appointed as national coordinators and they will coordinate the national project of identifying and analysing conflicts between Dutch insolvency law and company law with the assistance of Dr. Bas de Jong (Radboud University of Nijmegen) and Tom Dijkhuizen LLM of the Leiden Law School.