Jennifer Payne is Professor of Corporate Finance Law and a fellow and tutor at Merton College, Oxford. She writes widely in the fields of company law, corporate finance law, financial regulation and corporate insolvency. Her recent publications include Principles of Financial Regulation (OUP, 2016) (with John Armour, Dan Awrey, Paul Davies, Luca Enriques, Jeff Gordon and Colin Mayer); The Oxford Handbook of Financial Regulation (OUP, 2015, with Niamh Moloney and Eilis Ferran); Corporate Finance Law: Principles and Policy (Hart Publishing, 2011, 2nd edition 2015, with Louise Gullifer); and Schemes of Arrangement: Theory, Structure and Operation (CUP, 2014). She is a contributor to Palmer's Company Law, a founder editor of the Journal of Corporate Law Studies and a founder editor of the Oxford Business Law Blog. She has been a Visiting Professor at a number of leading institutions internationally, including Melbourne Law School, the National University of Singapore and the University of Auckland. She was elected to membership of the International Insolvency Institute in 2016. Jennifer is currently a member of the European Security and Markets Authority (ESMA)’s Securities and Markets Stakeholders Group. She was also a member of the Consultative Working Group of ESMA's Corporate Finance Standing Committee in 2015-17.
- This paper examines the institutional design of the EU European and Monetary Union. Specifically, it analyses five different institutions that have been set up in the post-financial crisis period, namely the three European Supervisory Authorities (ESMA, EBA and EIOPA), the European Financial Stability Fund (EFSF) and the European Stability Mechanism (ESM). The creation of these organisations reflects two different strands of reaction to the financial crisis and the sovereign debt crisis which followed it. The first is a recognised need to bolster and strengthen EU-level integration and oversight of the financial markets. The second is a requirement for financial stability mechanisms to address the difficulties of the worst-hit countries, not only to provide emergency assistance, but also to avert contagion and to enhance confidence in the euro area’s financial markets. There are some important similarities between these five bodies, but also some notable differences, not least their different institutional models: the ESAs are supranational agencies in all but name, whereas the EFSF and ESM are intergovernmental bodies. This institutional distinction has important consequences for the nature and remit of the powers of the various entities, and the institutional constraints faced by these bodies impacts on their ability to perform their roles effectively and well. This paper examines these issues and explores the ways in which these bodies might seek to overcome these challenges, in order to ensure that the institutional model of the EMU is fit for purpose.The global shift from securities being held directly by an investor to many securities being held via an intermediary raises numerous important legal issues. One difficulty raised by intermediation relates to the ability of corporate bonds to be restructured via an English scheme of arrangement. Schemes of arrangement are commonly used to restructure debt and involve the creditors being divided into classes to consider and vote on the proposed restructuring. The approval level is 75 per cent in value and a majority in number of each class. It is the majority in number requirement which creates a potential difficulty for bondholder schemes of arrangement. In particular, it requires careful application of the concept of a “creditor” in this situation since if it is the intermediary that is regarded as the relevant creditor for this purpose, rather than the underlying bondholders, the “majority in number” requirement becomes impossible to apply, and thus the scheme of arrangement cannot progress. Practitioners have fashioned a practical solution to this issue, but there are reasons to doubt the validity of this fix. Instead, this paper proposes that the simplest, and best, solution is a legislative one, namely to remove the “majority in number” requirement. This would have benefits for a range of scenarios including, but not limited to, bondholder schemes of arrangement.DOI: https://doi.org/10.1017/S0008197318000016This paper examines the intervention of the law, and the role of the court, in debt restructuring, both in terms of imposing constraints on creditors and in seeking to ameliorate the potential abuses that can arise from such constraints. Three potential forms of abuse are examined: the imposition of a restructuring on dissenting creditors, which introduces the potential for wealth transfers between creditors; the imposition of a moratorium while a restructuring is negotiated, which might lead to misuse of the process by managers wishing to prop up companies which are not viable, or may allow managers of a viable business to ‘shake off’ liabilities that it is capable of servicing; and the facilitation of rescue finance, which raises the potential for new creditors to be preferred at the expense of existing creditors. It is argued that the court’s role in protecting creditors from these three forms of potential abuse is vital, although the nature of that role differs according to the form of abuse. Recent debt restructuring reform proposals in both the UK and the EU, which adopt distinct approaches to the role of the court in this process, are examined in the light of this discussion.The European Commission published a draft Directive in November 2016, with the aim of ensuring that all Member States have in place an effective mechanism for dealing with viable, but financially distressed, businesses. The draft Directive includes provisions designed to encourage financing for the debtor company, both interim financing to “keep the lights on” for a brief period while the debtor negotiates with its creditors for a resolution to its financial distress, and where possible, to finance implementation of a restructuring plan, called “new financing” in the draft Directive. Creating such a financing regime is a complex and difficult issue, as the law’s intervention in this area often involves constraints on the rights of existing creditors, requiring that a careful balance is maintained between existing creditors’ rights and the rights of the interim financier. This paper examines the underlying policy rationale and benefits of having new and interim financing available to financially distressed debtor companies, and discusses the risks involved. It examines the EU Commission’s proposals in light of the experience of jurisdictions that have already tackled these issues, notably the United States and Canada, or have developed a market-based solution to this problem, such as the UK. While the European Commission’s wish to include such measures in its restructuring proposals is laudable, the measures as drafted raise concerns, particularly regarding risks associated with priority for the grantors of such finance. The authors suggest that there are four fundamental aspects of such financing on which the Directive could give guidance to Member States, namely, effective notice to pre-filing creditors, thresholds for the debtor to qualify, a menu of relevant criteria to balance benefit and prejudice, and a role for the court in resolving disputes, ensuring fairness to stakeholders, and serving as an accountability check on interim financing arrangements, all aimed at maintaining the integrity of the insolvency process.The second edition of this acclaimed book continues to provide a discussion of key theoretical and policy issues in corporate finance law. Fully updated it reflects developments in the law and the markets in the continuing aftermath of the Global Financial Crisis. One of its distinctive features is that it gives equal coverage to both the equity and debt sides of corporate finance law, and seeks, where possible, to compare the two. This book covers a broad range of topics regarding the debt and equity raising choices of companies of all sizes, from SMEs to the largest publicly traded enterprises, and the mechanisms by which those providing capital are protected. Each chapter analyses the present law critically so as to enable the reader to understand the difficulties, risks and tensions in this area of law, and the attempts made by the legislature and the courts, as well as the parties involved, to deal with them. This book will be of interest to practitioners, academics and students engaged in the practice and study of corporate finance law.This paper assesses the debt restructuring mechanisms available to companies in English law, compares these mechanisms with the Chapter 11 procedure in the US, and makes some suggestions for reform of the English system in this context. Rehabilitating a company in financial difficulties will almost always be preferable to liquidation for companies and their creditors, at least where the company is merely financially distressed, i.e. it is cash flow insolvent but nevertheless economically viable, so that there is a business worth saving. Five debt restructuring mechanisms are available to companies in English law: workouts, Company Voluntary Arrangements (CVAs), schemes of arrangement, administration and, lastly, a recent innovation of practitioners has been to twin a scheme of arrangement with administration. None of these devices are ideal as debt restructuring tools, as explained in this paper. Lessons can be learned from the US Chapter 11 process, although a simple transplantation of this procedure into English law is not recommended, as there are also disadvantages to the US procedure. Instead it is suggested that the English scheme of arrangement be reformed to allow a cramdown of whole classes to take place, to attach a moratorium to this procedure and to enhance the valuation process where restructuring takes place. Making these changes would provide English law with a stronger and more effective debt restructuring procedure.ISBN: 0023-933XSchemes of arrangement are an important and flexible mechanism, which can be used to reorganise a companys capital. Schemes have undergone something of a renaissance over the last decade or so, particularly as a debt restructuring device in the aftermath of the global financial crisis when companies and their advisors have needed to develop effective tools for dealing with financial distress. Schemes have also become the mechanism of choice for recommended takeovers. This book examines the uses of both member and creditor schemes, and their advantages and disadvantages compared to the alternatives that are available, in order to understand their current popularity. This includes an analysis of cross-border schemes, which have become very common in recent years. This book performs a critical, contextual and comparative analysis of schemes and their uses, and puts forward reform proposals that are designed to ensure that schemes continue to develop as an indispensable tool for companies for the future.DOI: 10.1017/S1566752912001309In recent years there has been a growth in the use of English schemes of arrangement by companies registered in other EU Member States. High profile recent examples include TeleColumbas GmbH, Rodenstock GmbH, and Primacom Holdings GmbH. In each case these companies were able to access the English scheme jurisdiction without shifting their seat or COMI to the UK. This paper investigates this phenomenon, considering the use of an English scheme of arrangement and why it might be regarded as valuable to these companies. The paper then tackles two issues. First, it assesses how these companies are able to access the English scheme jurisdiction, and, in particular, analyses the potential application of both the Insolvency Regulation and the Judgments Regulation in this regard. As part of this analysis the recognition and enforcement of English schemes of arrangement in other Member States is discussed. Second, it considers whether this use of English schemes gives rise to issues of forum shopping. This paper rejects the idea that forum shopping should be regarded as a concern in this context.ISBN: 1566-7529DOI: 10.1017/S1566752912000298The issue of whether and how to regulate short selling has been an issue that has vexed regulators for some time. While there are a number of potentially damaging consequences that are said to stem from short selling, there is also evidence that it can have beneficial effects on financial markets. In the wake of the collapse of Lehman Brothers in September 2008, and more particularly the falls in the prices of listed financial securities that followed, the regulation of short selling has come back onto the regulatory agenda with a vengeance. Various regulatory techniques, some temporary and some more permanent, have been adopted to deal with short selling. This paper explores those implemented in the US, the UK, Germany and France. The EU has also been developing its regulatory response and in February 2012 the final text of a regulation dealing with short selling was agreed. This paper considers the arguments for and against the regulation of short selling, and considers the EUs short selling regulation in the light of these arguments. It is suggested that although the provisions of the EUs regulation introducing disclosure to the regulator are broadly sensible, as are the provisions designed to foster a stricter settlement regime, other provisions are more problematic and have the potential to cause damage to European financial markets.ISBN: 1566-7529DOI: 10.1017/S1566752911400021In the fifteen year period to 2008 the private equity industry grew enormously in Europe, to the point where it began to be seen as a rival to the public markets. This gave rise to concerns, and calls for the private equity industry to be regulated. The financial crisis, and in particular the contraction of the market for debt prompted by the collapse of Lehman Brothers in September 2008, has led to a significant reduction in the number and value of private equity deals. However, if anything the financial crisis has led to increased call for the regulation of the industry. This paper examines the development of private equity transactions in Europe, and analyses the nature of these transactions. It then considers whether the concerns raised in relation to private equity are justified. Broadly, the arguments in favour of the regulation of private equity may be divided into two kinds: the need to increase transparency in the industry by imposing disclosure obligations, and systemic risk concerns. These arguments are considered, and the terms of the Alternative Investment Fund Managers Directive (AIFMD) are examined in the light of these issues. It is suggested that the arguments in favour of regulation of private equity are weaker than has been suggested and that this Directive does not adequately differentiate between hedge funds and private equity when imposing this regulatory regime.ISBN: 1566-7529Schemes of arrangement are an extremely valuable tool for manipulating a companys capital. Nothing in the Companies Act 2006 prescribes the subject matter of a scheme. In theory a scheme could be a compromise or arrangement between a company and its creditors or members about anything which they can properly agree amongst themselves. However, one of the most common uses of a scheme is as an alternative to a takeover offer. Indeed, in recent years schemes of arrangement have become the structure of choice for recommended bids. This paper examines the use of schemes of arrangement as an alternative to takeover offers, and in particular compares the level of protection for minority shareholders available under both structures. It might be expected that the level of protection would be equivalent, but this is not the case in practice. Significantly greater protection is put in place for minority shareholders in the target company by takeover regulation than exists in the context of a scheme. However, the purpose of minority protection is quite different within these two structures. This article suggests that the lower level of protection in schemes is justified within this context.ISBN: 1473-5970ISBN: 978-1-84946-004-0ISBN: 1613-2548ISBN: 9781849460132Globally, there has been a shift from securities being held directly by an investor, to a situation in which many securities are held via an intermediary. The existence of one or more intermediaries between the investor and the issuer has a potentially significant impact on the rights of the investor, the role and obligations of the issuer, and on the position and responsibilities of the intermediary. However, different jurisdictions have dealt with the issues arising from intermediation in a variety of ways. In the UK, for example, the concept of a trust is used to explain the different rights and obligations which arise in this scenario, whereas in the US the issues have been addressed by legislation, in the form of UCC Article 8. This variety is problematic, given that it is possible for an investor to hold securities in a number of different jurisdictions. A new UNIDROIT Convention on the issue of Intermediated Securities, the Geneva Securities Convention 2009, aims to create a common framework for dealing with these issues. This collection of essays explores the issues that arise when securities are held via an intermediary, and in particular assesses the solutions put forward by the new Convention on this issue.ISBN: 978-1-84946-013-2ISBN: 9781841138060ISBN: 978-1-847-03001-6ISBN: 0-19-929993-5ISBN: 0-19-929993-5DOI: 10.1017/S0008197305006999ISBN: 1469-2139ISBN: 1613-2548ISBN: 0023-933XISBN: 0023-933XISBN: 0008-1973ISBN: 1-84113-340-XISBN: 1-84113-174-1ISBN: 9041107339
Company Law, Corporate Finance, Corporate Insolvency, Financial Regulation
Options taughtTrusts, Company Law, Corporate Finance Law, Corporate Insolvency Law, Principles of Financial Regulation