Jassmine Girgis, ‘The evolution of corporate rescue in Canada and the United States’

ABSTRACT
This chapter explores the evolution of corporate rescue in both Canada and the US. The timing and specific circumstances surrounding the legislation’s enactment were different in each country, but the underlying concepts and goals within the broader context of bankruptcy legislation were the same. Both countries had experienced the profound effects of business failure on directly impacted stakeholders, as well as on surrounding communities, and they recognized that saving companies would protect investments, preserve jobs, maintain the supplier and customer base, and prevent the wider impact of bankruptcy on society. To that end, both countries devised proceedings to restructure and rehabilitate financially distressed companies, allowing them to re-emerge with new debt or equity structures and continue operating as going concerns.

Historically, traditional restructurings – that is, proceedings in which the debtor company engages in lengthy negotiations with its creditors to restructure its debt obligations and business operations, all under the supervision of the court – were used extensively. In a sense, traditional restructurings are simply ‘hypothetical sales’, whereby the existing creditors trade their debt for cash or equity in the reorganized company. This reflected the creditors’ judgment that the reorganized company would be worth more to them than to a third-party buyer. Successful companies emerge and continue operating, while unsuccessful companies are dissolved …

Girgis, Jassmine, The evolution of corporate rescue in Canada and the United States (August 1, 2021). Research Handbook on Corporate Restructuring edited by Paul J Omar, Jennifer LL Gant, Edward Elgar Publishing, 2021.

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