What’s it all about?

The past three years have seen insolvencies and restructuring make the headlines on an almost daily basis, and on a truly global scale. What began with a somewhat limited subprime mortgage crisis caused by a drastic increase in mortgage delinquencies and foreclosures in the US swiftly escalated into a full-blown global financial crisis which brought down some of the biggest names in Wall Street. Finally, the situation even threatened the ability of some countries to pay back spiralling amounts of debt.

An increasing number of companies are finding it difficult to pay their debts, and as a result debtors and creditors need to know precisely where they stand. Could a liquidation of the company concerned be required? What can creditors do under their finance documents to try to take control of security? Is a restructuring of debt possible? These are the sorts of questions that will be asked when events take a turn for the worse and, as an insolvency lawyer, you will be the one who has to come up with the answers.

The working culture

Insolvency law is an interesting and fast-moving area of the law which provides varied work. Some firms tend to work more with debtors while others focus on the creditor side. But whichever side of the line you fall on you are likely to find yourself reviewing complicated finance documents or preparing for big insolvency filings that span multiple jurisdictions.

As with other areas of corporate law working hours can be somewhat unpredictable.

There might be periods when you are not flat out (and your corporate and finance colleagues are) but whenever the economy takes a tumble insolvency lawyers must deal with the increased number of restructurings and liquidations that result. So in the eventful period either side of September 15 2008 when investment giant Lehman Brothers filed for bankruptcy it’s a fair bet that many insolvency lawyers did not get a great deal of sleep, But when the workload does pick up the nature of the work itself is sufficiently interesting and challenging to offset the increased hours.

Skills required

The first port of call for an insolvency lawyer is statutory law and you will eventually know your way around the Insolvency Act like the back of your hand. Given the worldwide, jurisdiction-spanning nature of insolvency you are likely to find yourself dealing with a variety of rules that encourage cross-border assistance and, of course, conflicts between national laws. In the event that you need to determine a creditor’s rights under finance documents you will have to be able to pick apart complicated documents and scrutinise the rights, remedies and limitations available to various parties – although, like anything else, this gets easier the more you do it.

But it doesn’t stop there because being an insolvency lawyer also requires familiarity with ongoing case law – perhaps more so than any other area of corporate law. So if you enjoy nothing more than reading up on case law in the library then insolvency law might be for you, albeit operating at a somewhat faster pace.

In addition to the above, the same skills that are required in other areas of law also apply to insolvency. Deadlines must be met, tasks must be juggled and the advice given to clients must be comprehensive yet clear.

What other practice areas do insolvency lawyers work most closely with?

Being an insolvency lawyer means that you’ll typically be exposed to a variety of practices. If the restructuring of a company requires that new security is put in place you will work alongside finance lawyers. Meanwhile, a company facing administration or liquidation will most likely have property assets as well as intellectual property assets, so you can expect to work with those departments too.

You should be prepared to deal with all of a company’s issues and this can result in work ranging from employment law and competition to pensions.

What word is an insolvency lawyer most likely to use and what does it mean?

Does ‘weekend’ count? But seriously, if I had to choose a single word or phrase above all others that insolvency layers use a lot it would be ‘Comi’. This is an acronym for ‘Centre of Main Interests’ and it is important because where an insolvent company operates in more than one EU state a single set of insolvency proceedings is opened in the state in which that organisation has its Comi, rather than multiple proceedings in various states. Lawyers will try to shift Comi where possible to a jurisdiction they find favourable to their needs. For example, they may move it to the UK which is widely regarded as a favourable regime that offers several restructuring options.

Recent Developments

Having occurred around 18 months ago it might be stretching a point somewhat to call the Chapter 11 filing of Lehmans a recent development, although the significance of that event with regard to financial markets, employment, pension funds and more cannot be overstated. Perhaps the most important events to affect this area of the law of the past few months have been potential insolvencies and debt defaults that did not ultimately come to pass.

Last December Dubai World, the state-owned conglomerate, received a $10bn (£6.3bn) bailout from the neighbouring state of Abu Dhabi and thereby avoided defaulting on its $4.1bn Islamic debt that was due to mature that day. A few months later the world’s attention had shifted from the Middle East to Europe, and Greece in particular. The struggling country received a $146bn three-year bailout package from the EU and the International Monetary Fund. It has since staved off any potential default on its debt. After the collapse of Lehman, the fourth largest US investment bank and the single biggest bankruptcy filing in US history, the aversion (or delay) of further financial crises in the Middle East and Europe could be seen as a tentative step back towards a semblance of normality.

Peter Ibrahim, associate, Weil Gotshal & Manges