In December 2018, UNCITRAL Working Group V (Insolvency Law) held its 54^th session in Vienna where it discussed, among other topics, cross border insolvency of enterprise groups. These discussions included amendments to the Enterprise Group Insolvency: Draft Model Law (‘draft Model Law’) and the Enterprise Group Insolvency: Guide to Enactment of the Draft Model Law (‘draft Guide to Enactment’). The Working Group began drafting the Model Law after agreeing to the UNCITRAL mandate in December 2013.

Purpose and scope of Draft Model Law

The draft Model Law addresses the conduct and administration of insolvency proceedings relating to two or more enterprise group members, whether those proceedings are local proceedings commenced in the enacting State, foreign proceedings commenced in another State, or proceedings commenced in both States. While designed to complement the Model Law on Cross-Border Insolvency (‘MLCBI’), the draft Model Law can be distinguished as it focuses on multiple insolvency proceedings relating to multiple debtors that are members of the same enterprise group.

The purpose of the draft Model Law is to facilitate cooperation and coordination between insolvency proceedings affecting different members of an enterprise group in order to achieve an insolvency solution applicable to the whole (or part of) that enterprise. This goal is in contrast, but complementary, to the MLCBI which focuses on multiple proceedings for a single debtor.

Definition of ‘group insolvency solution’

A point of discussion was the new term ‘group insolvency solution.’ Such a solution can include the reorganization or sale as a going concern of the whole or part of the business assets of one or more of the enterprise group members. The solution is intended to be developed, coordinated and implemented through a ‘planning proceeding’, discussed below.

Definition of ‘planning proceeding’

Another point of focus was the definition of a ‘planning proceeding’ and the scope of article 18 in providing for the appointment of a group representative. A planning proceeding is a procedure with the purpose of appointing a representative who will preside over the development and implementation of an insolvency plan. An insolvency plan is a form of rescue procedure or restructuring solution, and is decided upon by a court. Similar to an in-court settlement agreement, the benefit of an insolvency plan is that it does not require unanimous consent of all parties involved. This may be particularly useful in the context of enterprise groups.

Relief provided under the draft Model Law

The following three articles providing for relief under the draft Model Law were discussed in the session:

• article 19: Relief available to a planning proceeding [taking place in this State] ;
• article 21: Provisional relief that may be granted upon application for recognition of a foreign planning proceeding; and
• article 23: Relief that may be granted upon recognition of a foreign planning proceeding.

Under articles 19, 21 and 23, appropriate relief may be granted, including staying an execution against the assets of the enterprise group member; suspending the right to transfer, encumber, or otherwise dispose of any assets of the enterprise group member; staying the commencement or continuation of individual actions or individual proceedings concerning the assets, rights, obligations, or liabilities of the enterprise group member; and staying any insolvency proceeding concerning a participating enterprise group member.

Other possible relief includes providing for the examination of witnesses, the taking of evidence, or the delivery of information concerning the assets, affairs, rights, obligations, or liabilities of the enterprise group member. Further measures of relief can be granted including approving arrangements concerning the funding of an enterprise group member participating in the planning proceeding and authorizing the provision of finance under those funding arrangements, and granting any additional relief that may be available to a registered liquidator or administrator.

The articles providing relief are distinguishable from each other by their purpose or their jurisdictional application. For example, article 19 provides for relief generally, and is available to planning proceedings which take place within the State, at the request of the group representative. Article 21 provides for urgently needed relief that may be ordered at the discretion of the court and is available from the moment recognition of a foreign proceeding is sought. This is distinguished from relief available under article 23 which is also discretionary but only available upon recognition of the foreign proceeding. Article 21 has been interpreted to mean that recognition is a pre-condition for granting discretionary relief and that the relief may be sought at any time after the pre-condition has been granted: meaning its availability is not limited to the time at which recognition is granted. Article 23 is not exhaustive as the court is not restricted in its ability to grant any type of relief that is available under the law of the enacting State. Additional relief is also available under article 31.

The Working Group adopted the substance of the draft Model Law and the draft Guide to Enactment which will again be considered at its next meeting in May 2019. The final text of the Model Law is set to be published at the end of 2019. After this anticipated wait, it is hoped the Model Law will provide effective mechanisms to promote the objectives of cooperation, development of effective group insolvency solutions, and fair and efficient administration.