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backASIAtalk January, 2010

A spotlight on Asia’s Insolvency Laws

The global economic crisis has produced a swathe of spectacular corporate collapses with gigantic icons of Wall Street, such as Lehman Brothers, and of industry, such as General Motors, adding a new – and unimagined – chapter to their corporate histories: bankruptcy. Reaction to these massive and complex failures includes, if only at the fringes, a re-examination of how economies around the world deal with insolvent or struggling businesses.

Historically, bankruptcy law has developed on a country-by-country basis, reflecting the different economic, cultural and social traditions. Attempts at international harmonisation or standardisation remain rare.

Insolvency practitioners face challenges when working on cases involving multinational companies, with assets and liabilities spread over several jurisdictions, and subject to widely different insolvency regimes. In order to be effective across borders, office holders in an insolvency need to have their authority recognized in jurisdictions other than their home. That is by no means straightforward.

The failure of global investment bank Lehman Brothers is one such example, as its collapse led to what looks like being the most complex international bankruptcy in history. After the bank’s demise Lehman’s regional management in Asia Pacific sought the appointment of KPMG partners as provisional liquidators to the Hong Kong entities and substantially all of Lehman’s operations in the region outside of Japan. They also asked the firm to conduct an Asia-wide solvency review covering 120-odd operating entities. That review saw KPMG firms take control of Lehman’s businesses in Hong Kong and Singapore, a brief that covered 14 of the group’s regional entities.

To read and download entire 6-page report, please click here.

Source: KPMG Singapore - GAI

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