On October 17, the International Committee hosted the initial webinar in its planned series of “Directors’ Duties Across Borders in the Insolvency Zone.” The first episode focused on Europe, with speakers from France (Alexandre Koenig of Stephenson Harwood), Germany (Bernd Meyer-Loewy of Kirkland & Ellis), Ireland (Gemma Freeman of Dentons) and the Netherlands (Krijn Hoogenboezem of Resor). Debra Grassgreen (Pachulski Stang Ziehl & Jones) moderated the discussion.
Over about 75 minutes, the panelists answered questions related to the duties directors must confront under domestic law when operating in the zone of insolvency. The panelists all noted that the European Union has moved toward encouraging restructurings at an early stage. For some countries, like Ireland, this was nothing new at all. In most jurisdictions, the board remains in place even if an insolvency practitioner is appointed to help with the process.
There was a brief overview of the restructuring regimes currently in place. Both Ireland and the Netherlands have been moving to promote themselves as alternatives to London. The Netherlands has gone the farthest in terms of inviting companies to file there by just needing some minimal connection.
In addition to discussing boards staying in control, there were questions around whether the director’s duties shift as the company operates in the zone of insolvency. In The Netherlands and France, the duty remains to the corporation. The situation is more nuanced in Germany and Ireland. There was also discussion on directors’ personal liability, and all the countries featured had some type of potential civil liability for breach of duties.
The discussion then turned to the question of third-party releases and whether they are available over the objections of dissenting creditors. In Germany, this can occur if “adequate compensation” is provided, except no one knows what that actually means. In The Netherlands, a third-party release can’t bind dissenting creditors. In France, corporate guarantors can be released, but not individuals, while in Ireland directors’ statutory liabilities can’t be released.
Finally, the discussion concluded with some thoughts as to best practices in the respective jurisdictions for directors to protect themselves. All panelists agreed that hiring advisers early and making sure decisions are accurately recorded are all critical.
The second session in the series will be streamed on January 11, and the focus will be on the Americas. The jurisdictions to be covered will be Brazil, Canada, Caymans and Mexico. Future sessions are intended to cover the Far East and Africa/Middle East.