Restructuring of businesses [PhD]
In her PhD project Marie Meling discusses the possibilities for restructuring of Norwegian businesses in financial difficulties. The project looks at the spectre of available solutions; private “work-outs”; use of M&A mechanisms found in company law and more traditional insolvency proceedings, both nationally and internationally. The main research question is to find out how legislation effects bargaining positions in a restructuring process.
About the project
The project will focus on the bargaining positions of the financially distressed company and the three traditionally most important financial stakeholders, namely the secured financial creditors (typically banks), the unsecured financial creditors (typically bondholders) and the owners of the company.
The combination of global market changes, over-contracting and a significant drop in the oil price and thereby increased focus on reducing oil companies’ costs has led to the need for owners, lenders and other parties within the Norwegian shipping- and oil service market to “restructure” their business. In this context, the term “restructuring” is used as a description for the changing of the composition, conditions and/or ownership structure of assets and liabilities of a debtor, when the debtor is in an unusually challenging financial situation. As the main focus of these processes will be to improve the company’s balance sheet through reduction of financial liabilities, the term “financial restructuring” is also used. The purpose of such a restructuring will be to enable the continuation, in whole or in part, of the debtor’s activities. The project will benefit from discussing “real life examples” taken from the many ongoing restructurings in the shipping- and offshore sector in Norway.
In Norway, the restructurings of companies or groups of companies are usually done as out-of-court-restructurings or, if we use the World Bank’s expression, “in the shadow of the law”. The Norwegian Bankruptcy Code (Nw. konkursloven) of 1984 does not provide the required flexibility for a restructuring to succeed. Company groups within the shipping- and offshore sector are usually also having assets and activities outside of Norway, and the lack of legal tools to deal with this international aspect in a proper manner further complicates many of the restructurings. The message, both in the preparatory documents, in the later revision rounds for the Bankruptcy Code and in the many (non-binding) international guidelines applicable to restructurings, is, however, that more restructurings should be brought “out of the shadow” and “into the light of the law”. One of the aims of the project is to analyse whether such a shift from purely consensus based solutions to more court led and forced solutions will actually be beneficial to the involved stakeholders.
The project fits well into the international debate and development of (new) rules in foreign and international law, e.g. EU’s Proposal for a Directive of the European Parliament and og the Council on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU (2016/0359 (COD)) which is stated to be EEA-relevant .
The project is expected to be concluded in 2021, with the submission of the PhD thesis.