Corporate Rescue

The main aim of a Corporate Rescue is to preserve the business of a financially distressed corporation as a going concern, on the premise that the preservation of the corporation as a going concern will provide creditors a better return as compared to liquidating the corporation. Under the Companies Act 2016, financially distressed company can opt to file for a Corporate Voluntary Arrangement (“CVA”) or Judicial Management (“JM”). Protection or a moratorium will be granted to corporations upon filing for either a CVA or JM.

A CVA provides provisions for obtaining collective agreement from the creditors and members of the corporation a proposal for a compromise or an arrangement. Insolvency practitioners will be appointed as nominee to review the corporation’s business plan and determine that it has reasonable prospect of success and calls for a creditors’ meeting to approve the CVA proposal. During the creditors’ meeting, the creditors shall appoint the nominee or other insolvency practitioner as supervisor to supervise the approved proposal.

A financially distressed corporation can apply for a JM Order from the Court provided that there is a reasonable probability that by preserving the corporation, the creditors will receive a better return as compared to liquidation. An insolvency practitioner will be appointed as Interim Judicial Manager to preserve the corporation’s position pending approval of the JM proposal and is also responsible to call for the creditors’ meeting to approve the JM proposal. The interim JM or other insolvency practitioner will be appointed by the creditors to carry out the approved proposal.