Publication Type

Journal Article

Version

publishedVersion

Publication Date

5-2025

Abstract

Out-of-court workouts can save significant costs associated with the initiation of a formal insolvency proceeding. Therefore, they can help minimise the loss of value experienced by an insolvent firm, ultimately contributing to the maximisation of the returns to creditors and the reorganisation of viable but financially distressed businesses. Additionally, an out-of-court agreement can provide a level of flexibility and confidentiality that is usually lacking in formal insolvency proceedings. Thus, an out-of-court workout can serve as a valuable mechanism to deal with a situation of financial distress, especially in the context of countries with inefficient insolvency systems and companies with concentrated debt structures. Yet, workouts need to be promoted. First of all, countries should identify and get rid of any legal and regulatory obstacles that may prevent an out-of-court restructuring. Secondly, all the relevant actors involved in a situation of financial distress need to be aware of the value and limitations of workouts and how to implement them successfully. To facilitate this latter goal, the Ibero-American Institute for Law and Finance decided to embark on a project that led to the publication of the "Latin American Principles for Out-of-Court Workouts".

Discipline

Bankruptcy Law | Dispute Resolution and Arbitration | Latin American Studies

Publication

International Corporate Rescue

First Page

69

Last Page

73

ISSN

1572-4638

Publisher

Chase Cambria

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