Third-Party Releases in Insolvency of Multinational Enterprise Groups

Kokorin Ilya
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Kokorin Ilya: Meijers PhD candidate, Department of Financial Law, Leiden University, Leiden, The Netherlands.

European Company and Financial Law Review, 2021, vol. 18, issue 1, 107-140

Abstract: Europe is experiencing the rise of restructuring proceedings, which has recently culminated in the adoption of the Restructuring Directive. While being a major achievement in harmonising substantive (pre)insolvency law in the EU, it lacks rules targeting restructuring of multinational enterprise groups. As a result, effectiveness of group reorganisations may be undermined. Nevertheless, some jurisdictions adopt innovative tools, facilitating group solutions. Among them – third-party releases. Such releases entail a total or partial discharge or amendment of claims against third parties, such as co-obligors, guarantors and collateral providers (typically, group members) in the insolvency or restructuring proceeding of the principal debtor.The diversity of approaches to third-party releases highlights their controversial nature. Such releases may frustrate legitimate expectations of creditors relying on cross-guarantees and other forms of cross-liability arrangements. Extending the effects of debt reorganisation to third parties in the absence of a separate insolvency proceeding may also run contrary to the longstanding views on corporate insolvency and entity shielding. This article argues that a single-entity-restructuring risks being short-sighted and that third-party releases are a matter of commercial necessity, synchronising legal responses with actual business models and better addressing the complexity of group interdependencies, realised through various intra-group liability arrangements.

Date: 2021
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DOI: 10.1515/ecfr-2021-0002

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