Insolvency Assessment
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Publication Chile : Insolvency and Creditor Rights Systems(Washington DC, 2004-06) World BankThe legal and institutional framework governing creditor rights and insolvency proceedings in Chile reasonably complies with expectations of a modern, credit-based economy, although some shortcomings affect the full effectiveness of credit risk management and resolution: Financial institutions over-rely on real estate as collateral. Pledges are not enough developed because legislation on secured interests over movable assets is fragmented and the publicity and registration mechanism for pledges are not sufficiently reliable. Individual enforcement proceedings are lengthy and complicated, both for secured and unsecured creditors. Enforcement proceedings using executory instruments take 1 to 3 years, whereas creditors not enjoying such instruments use ordinary proceedings whose duration is even longer (3 to 5 years). Insolvency legislation is integrated into the country's broader legal and commercial system, providing a liquidation proceeding whose average duration, however, is 2 to 3 years. The Insolvency Law also governs judicial reorganization proceedings but classification of creditors for voting is not allowed, which may be a relatively significant rigidity in an environment where most financial credit is secured. Treatment of contractual obligations in insolvency is not sufficiently developed in the Insolvency Law, which also lacks clear provisions on how to deal with subordination debt agreements and financial contracts in bankruptcy. Provisions to deal with insolvency cases of a cross-border nature are fairly antiquated and not responsive to solve main problems typically present in those cases. Corporate workouts would be significantly increased if out-of-court plans approved by a majority of creditors were able to be converted into prepackaged restructuring plans that bind dissenting minorities. The judicial framework for commercial enforcement and insolvency proceedings is generally perceived as being independent and reliable, although most courts deal with an excessive number of processes. Notwithstanding, there are no commercial courts nor courts specializing in insolvency in Chile. Insolvency administrators are independent professionals supervised by the Bankruptcy Commission, a body meeting the requirements of an independent regulatory institution. The Bill on Second Capital Market Reform, submitted to Congress, is a relevant step in the right direction to make Chilean creditor rights and the insolvency system more effective.Publication Mauritius : Insolvency and Creditor Rights Systems(Washington DC, 2004-03) World BankThe Bank assessed the Mauritius insolvency and creditor rights systems pursuant to a joint IMF-World Bank initiative to develop reports on the observance of standards and codes ("ROSC"), based on the Bank Principles and Guidelines for Effective Insolvency and Creditor Rights Systems during 2002. The assessment team interviewed a cross section of country stakeholders regarding the effectiveness of the legal infrastructure, and its implementation supporting debtor-creditor relationships, corporate insolvency and credit risk management and resolution practices. Conclusions in this assessment are based largely on a review of applicable legislation and information gathered through interviews conducted by the staff team, and other inputs provided by the Steering Committee on Insolvency and Creditor Rights set up by the Government of Mauritius in January 2003. In addition, five commercial banks provided responses pertaining to credit risk management and corporate recovery practices with respect to distressed assets. Policy recommendations include: creditors rights and enforcement areas, some fine tuning is required to broaden the use of security interests on movable and immovable property, and to ascertain the maximization of the value of the assets for sale upon seizure; enforcement procedures should be streamlined further by accelerated debt recovery rules and more efficient procedures for execution, enforcement and auctions; Credit Information Bureau should be established in Mauritius, and, the government should encourage the development of Credit Rating Agencies. On the legal framework for corporate insolvency, a global reform of the insolvency procedures should be pursued in order to provide Mauritius with a modern and efficient commercial insolvency law. It is also recommends the necessary amendments to the Bankruptcy Act and Bankruptcy Rules to take care of both traders, non-traders and companies insolvencies, and, the harmonious and uniform recovery procedures for all debts, including amounts due to the State.