UNCITRAL Legislative Guide on Insolvency Law, Part Three

Treatment of Enterprise Groups in Insolvency

image of UNCITRAL Legislative Guide on Insolvency Law, Part Three
Adopted in 2010, this text is designed to provide timely guidance to States on how to develop and improve the administration of the insolvency of enterprise groups, both domestically and in the cross-border context. It recognizes that the business of corporations is increasingly conducted, both domestically and internationally, through enterprise groups, which are therefore an important feature of the global economy and significant to international trade and commerce. Notwithstanding that significance, and the importance of knowing how a group will be treated in insolvency if its business fails, as well as the need for fast and efficient resolution of its financial difficulties, the Commission noted that very few, if any, States recognized enterprise groups as distinct legal entities or had a comprehensive regime for their treatment in insolvency.



Addressing the insolvency of enterprise groups: Domestic issues

Enterprise groups may be structured in ways that minimize the threat of insolvency to one or more group members, by entering into cross-guarantees, indemnities and similar types of arrangements. Where problems do arise, a parent may seek to avoid the insolvency of other group members in order to preserve its reputation and maintain its credit in commercial and financial spheres by providing additional finance and agreeing to subordinate intra-group claims to external liabilities.


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