Selective Corporate Restructuring Strategy

Abstract

This article engages with a fundamental, but under-theorised, fact: that modern UK and US corporate restructuring plans frequently impair only selected creditors, and frequently treat impaired creditors of equal rank differently. It starts from the premise that selectivity and differential treatment, while often justifiable, raise normative questions about the boundaries within which they ought to be permitted. It then reviews selective and differential strategies in three UK restructuring procedures, using US chapter 11 as a comparator. The core contention is that selectivity and differentiation are best regulated by the threat of independent review against a menu of relevant criteria. A menu of criteria is developed, designed to distinguish legitimate and illegitimate uses of selective and/or differential strategies, and these criteria are mapped onto the various UK restructuring law procedures and US chapter 11. The article concludes with some limited suggestions for reform directed mainly at the UK company voluntary arrangement.