Most of Asia does not have the equivalent of America’s Chapter 11. Instead we have use a modified version of the UK’s system of administration. The philosophy behind the system of administration is to give a business the benefit of a moratorium and during this time the administrator shall try to reassess its future and if possible rehabilitate the business. Thus administration is a stay against liquidation or receivership. Chapter 11 on the other hand, assumes without contrary evidence that going concern value is higher than liquidation value and the best way of achieving this to retain management who design a plan of reorganization that may include all or part of the business’ disposal. As a result, under the system of administration creditors retain far more rights and powers than under Chapter 11.
The key therefore in keeping a business intact under a system of administration is to have a pre-negotiated and credible solution, which not only allows the business to survive but also delivers to creditors an outcome that is at least as good as and preferably better than a plan of liquidation.
ACH has played key roles in and has delivered such pre-negotiated and credible solutions.
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