Integrating the Insolvency and Secured Transactions Regimes: ADB’s Experience Presentation by Hamid Sharif Assistant General Counsel 6 May 2008

Background ADB was one of the first multilateral institutions to deal with an integrated approach to Secured Transactions and Insolvency Law ReformsADB was one of the first multilateral institutions to deal with an integrated approach to Secured Transactions and Insolvency Law Reforms Asian Financial CrisisAsian Financial Crisis −Highlighted various weaknesses in commercial law

ADB’s Earlier Initiatives In 1998, ADB initiated regional technical assistance projects forIn 1998, ADB initiated regional technical assistance projects for −Secured Transactions Law Reform (RETA 5773) and −Insolvency Law Reform (RETA 5795) Output: Development of either regime should be accompanied by a corresponding development of the otherOutput: Development of either regime should be accompanied by a corresponding development of the other

ADB’s Earlier Initiatives Promoting Regional Cooperation in the Development of Insolvency Law (RETA 5975 )Promoting Regional Cooperation in the Development of Insolvency Law (RETA 5975 ) −Interaction between secured transactions and insolvency law regimes

Other Past Projects Cambodia-designing a secured transactions registry system People’s Republic of China-State enterprise insolvency reform India–secured transactions reform Indonesia-capacity building for bankruptcy and secured transactions Lao PDR-development and application of secured transactions and bankruptcy laws Mongolia-development of the framework for secured collateral Nepal-insolvency and secured transactions reform Sri Lanka-secured transactions reform Thailand-training in business reorganization Viet Nam-registration system for secured transactions

Some Lessons Learned From Previous Law and Policy Reform Projects India–secured transactions reformIndia–secured transactions reform Nepal–insolvency and secured transactions reformNepal–insolvency and secured transactions reform Thailand–bankruptcy lawThailand–bankruptcy law Viet Nam–secured transactions registryViet Nam–secured transactions registry

ADB Report Report published in April 2008Report published in April 2008 −Need to have an integrated approach −Proposed a set of general principles

Areas of Intersection Creation of a security interestCreation of a security interest Registration of the security interestRegistration of the security interest Enforcement of the security interestEnforcement of the security interest −Possible source of tension

Areas of Tension Application of the antecedent transactions avoidance provisions (i.e., fraudulent transactions)Application of the antecedent transactions avoidance provisions (i.e., fraudulent transactions) Invalidation of an unregistered secured property interestInvalidation of an unregistered secured property interest Application of the priority payment rules to the proceeds of the secured property sale (i.e., tax and employees’ compensation)Application of the priority payment rules to the proceeds of the secured property sale (i.e., tax and employees’ compensation)

General Principles Creation of a secured transactionCreation of a secured transaction Consequences of the opening of an insolvency caseConsequences of the opening of an insolvency case Registration/perfection of a secured transactionRegistration/perfection of a secured transaction EnforcementEnforcement Possession, use, and dealings with secured property during stay against enforcement actionPossession, use, and dealings with secured property during stay against enforcement action Limitation of the priority claimsLimitation of the priority claims

Ongoing Technical Assistance Projects Pakistan–strengthening secured transactions and insolvency regimesPakistan–strengthening secured transactions and insolvency regimes Viet Nam–expansion of secured transactions registry facilityViet Nam–expansion of secured transactions registry facility Lao PDR–promoting governance in financial transactionsLao PDR–promoting governance in financial transactions Vanuatu–secured transactions reformVanuatu–secured transactions reform Pacific Islands–diagnostic studies for secured transaction reforms in the Pacific regionPacific Islands–diagnostic studies for secured transaction reforms in the Pacific region

Moving Forward Choice to adopt general principles is with member countriesChoice to adopt general principles is with member countries Implementation of reform measures must be monitoredImplementation of reform measures must be monitored Future work may consider other factors– consumer credit, noncorporate business enterprises (incl. small and medium enterprises), and financial institutions.Future work may consider other factors– consumer credit, noncorporate business enterprises (incl. small and medium enterprises), and financial institutions. Results/Monitoring/EvaluationResults/Monitoring/Evaluation

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