Thematic Review on Out-of-Court Corporate Debt Workouts
FSB jurisdictions have adopted a variety of approaches to complement in-court insolvency proceedings and facilitate restructurings through out-of-court debt workout frameworks, including most recently in response to COVID-19.
Effective corporate restructuring and insolvency frameworks are necessary to help minimise damage to the economic and financial system that could be caused by widespread defaults. Out-of-court workouts (OCWs) can represent a less costly and more flexible alternative to full, formal insolvency proceedings and can play a useful role in dealing with a higher number of cases, particularly if the involvement of courts is minimal.
This peer review aims to support COVID-19 response and recovery efforts by examining FSB member jurisdictions’ practices, experiences and lessons from OCWs.
describes the types of OCW frameworks that exist across FSB jurisdictions and highlights the main features considered important by jurisdictions for increasing their efficiency;
includes a focus on the challenges in the use of OCWs by small and medium-sized enterprises (SMEs), and features to overcome these challenges and help with a large number of restructurings;
outlines the legal and regulatory factors that facilitate OCWs as well as elements of the legal and regulatory regimes that are of relevance to the financial system; and
describes how the functioning of OCW frameworks is supported by financial sector authorities.
The report recommends that FSB jurisdictions should consider assessing the efficiency of their OCW frameworks, collecting data and developing metrics for these assessments, reviewing whether there are significant barriers to their use by SMEs, and taking steps to reduce such barriers where necessary. In addition, the FSB, working with other international bodies, will promote the sharing of OCW practices and experiences.