Mandatory disclosure in corporate debt restructuring via schemes of arrangement: A comparative approach

Abstract

Creditors often face significant information asymmetry when debtor companies seek to restructure their debts. In the United Kingdom, it is mandatory for debtor companies, seeking to invoke the courts' jurisdiction to restructure their debts via schemes of arrangement (schemes), to disclose material information in the explanatory statement to enable the creditors to make an informed decision as to how to exercise their votes in creditors' meetings. The English schemes have been transplanted into common law jurisdictions in Asia, including Hong Kong and Singapore. However, due to the differences in the shareholding structures and the kinds of debts that are sought to be restructured in the UK and Hong Kong/Singapore, this transplantation gives rise to the question as to whether information asymmetry is in fact adequately addressed in the scheme process. Drawing from the experiences of Hong Kong and Singapore, we argue that there are three principal concerns in the current disclosure regimes: how debtors disclose the analysis as to the returns pursuant to the best available alternative option if the schemes do not proceed; how debtors disclose advisors' fees; and the equality of provision of information in the scheme process.

Enhancing creditor decision-making in South African business rescue proceedings: a comprehensive analysis of information requirements in business rescue plans

“…Similar to the findings of Wan and Watters (2021) on corporate reorganisations using schemes of arrangements in Hong Kong and Singapore, participants mentioned that they would have already engaged the BRP on their commitment to advance PCF before the creditor's meetings. The BRP would then provide relevant and updated financial information to the financial creditors during the negotiations, which would not be offered to other creditors for practical and confidentiality reasons.…”

“…One participant asserted that alternative BR plans or proposals are presented only when the rescue proceedings are contentious, usually by a creditor, director, or shareholder. While logical, Wan and Watters (2021) counter-argue that this approach has challenges as determining alternatives can be complex and subjective.…”

“…Business rescue proceedings also involve suppliers and trade creditors . While the larger, more sophisticated financial creditors are likely to have material information about the distressed company, the trade creditors are unlikely to have such access (Wan and Watters, 2021). These trade creditors are usually unsecured and have minimal voting rights in spite of having a legitimate interest in the business rescue proceeding (Rosslyn-Smith and De Abreu, 2022).…”

“…This qualitative study aims to fill a critical research gap by providing new insights into creditors’ decision-making processes and information needs when presented with a BR plan. Creditors increasingly demand that BR plans sufficiently disclose material information to enable them to make an informed decision on how to exercise their votes in creditors' meetings (Wan and Watters, 2021). Thus, this study aims to understand how creditors vote by outlining absent but crucial information in BR plans that will facilitate effective decision-making.…”

Responsible Management in the Hotel Industry: An Integrative Review and Future Research Directions

“…Many studies rely on voluntary disclosure [9] to examine the benefits of disclosing ethical practices [153]. The impact of mandatory disclosure, an essential topic in corporate law literature [154,155], is not sufficiently addressed in sustainability research related to the hotel industry. The limited literature in these areas can be at least partially explained by a lack of standardized regulations including challenges from regulators failing to keep pace with technological developments [156].…”