This Note analyzes whether solvent schemes of arrangement and Part VII transfers should be recognized under Chapter 15. Although this issue primarily concerns U.K. insurance companies, the discussion of Chapter 15 is useful outside the context of insurers. Part I of this Note outlines the requirements for recognition of a scheme of arrangement under § 425 of the Companies Act 1985 and for Part VII transfers under the FSMA, and their prior treatment under 11 U.S.C. § 304. Part II evaluates the statutory criteria under Chapter 15, highlighting differences between Chapter 15 and former § 304, and asserts that solvent schemes of arrangement qualify as “foreign proceedings” under Chapter 15 because the Companies Act is a law related to insolvency. Because there is, as yet, no case law established under Chapter 15 concerning Part VII transfers, Part III of this Note evaluates Part VII transfers under the Chapter 15 criteria and questions whether Part VII transfers will be recognized under Chapter 15. It presents both sides of the argument: Part VII transfers do not qualify as foreign proceedings because they do not arise out of a law relating to insolvency; and, conversely, Part VII transfers should qualify as foreign proceedings because they arise out of a law that adjusts debt. Part III of this Note also provides alternative solutions for Part VII transfers if they are not recognized under Chapter 15. This Note concludes that although several solvent schemes of arrangement have been recognized under Chapter 15, it does not confirm that all solvent schemes of arrangement will be recognized. Moreover, due to the inconsistent and limited case law concerning Part VII transfers under the U.S. Code, it is unclear whether Part VII transfers qualify as “foreign proceedings” under Chapter 15. Despite arguments asserting that Part VII transfers do not arise out of a law relating to insolvency, and therefore do not qualify as “foreign proceedings” under Chapter 15, the author concludes that in light of the goals of Chapter 15 and the Model Law, U.S. courts will try to facilitate recognition of Part VII transfers within the framework of Chapter 15.
Jennifer D. Morton,
Recognition of Cross-Border Insolvency Proceedings: An Evaluation of Solvent Schemes of Arrangement and Part VII Transfers under U.S. Chapter 15,
29 Fordham Int'l L.J. 1312
Available at: http://ir.lawnet.fordham.edu/ilj/vol29/iss6/3