International Insolvency & Restructuring | Navigating Business Recovery Across Borders

Insolvency is no longer a local affair. In today’s globalised economy, when a business faces financial distress, its creditors, assets, operations and legal obligations are often scattered across multiple jurisdictions. As such, international insolvency and restructuring law has become one of the most critical and complex areas of cross-border legal practice.

Whether managing distressed debt, implementing turnarounds, enforcing claims or coordinating multinational restructuring strategies, legal advisers and other stakeholders must now think globally. Domestic insolvency regimes remain diverse in approach and philosophy; yet, economic interdependence demands cooperation, harmonisation and strategic foresight.

This foreword to the International Insolvency & Restructuring Practice Area Guide explores the legal foundations, trends and challenges of insolvency in a cross-border context. It also provides valuable insights for navigating corporate distress and recovery across various legal systems.

What is Cross-Border Insolvency?

Cross-border insolvency refers to legal proceedings involving debtors with assets or creditors in more than one country. It addresses how differing jurisdictions coordinate to manage the business’s insolvency, ensuring fair treatment of stakeholders and the efficient administration of assets across borders, often guided by international frameworks, such as the UNCITRAL Model Law.

Modern enterprises are often structured as international groups, comprising holding companies, subsidiaries, operational hubs and financial arrangements that span multiple countries. When financial difficulty arises, insolvency professionals must grapple with:

• Multijurisdictional creditor claims;
• Varying rules on insolvency procedures;
• Conflicting approaches to restructuring vs liquidation;
• Divergent stakeholder rights and priorities; and
• Recognition and enforcement challenges for foreign proceedings.

This complexity requires coordination, transparency and careful navigation of local laws while preserving value, managing risk and maintaining stakeholder confidence.

Differences Between Cross-Border & Domestic Insolvency Regimes

There lacks a universal model governing insolvency law. Jurisdictions fall along a spectrum shaped by legal tradition, economic policy and cultural attitudes toward debt.

Key differences in cross-border and domestic insolvency include:

• Creditor vs Debtor-in-Possession Models: The US (under Chapter 11) favours management-led restructuring mechanisms, while many European and Asian systems shift control to external administrators.
• Rescue-First vs Liquidation-First Policies:  Some regimes prioritise business continuity, while others emphasise rapid asset realisation.
• Priority of Claims: Secured creditor rights vary significantly, particularly in emerging markets.
• Directors’ Duties: The point at which directors become liable for trading while insolvent differs between common and civil law systems.
• Role of the Court: Judicial involvement ranges from minimal oversight to mandatory approval of all key actions.

These variations complicate cross-border restructuring and insolvency proceedings, especially when differing outcomes are possible under each local law.

Cross-Border Insolvency Frameworks & Coordination Tools

To address the complexities of international insolvency and restructuring, international frameworks aim to encourage cooperation and recognition between jurisdictions. The most prominent include:

UNCITRAL Model Law on Cross-Border Insolvency Explained

Adopted in over 50 jurisdictions, including the US, UK, Australia and Singapore, the UNCITRAL Model Law provides mechanisms for:

• Recognition of “foreign main” and “foreign non-main” insolvency proceedings;
• Stay of actions against debtors;
• Cooperation between courts and insolvency representatives; and
• Coordination of concurrent proceedings.

Its widespread adoption has improved predictability and collaboration in international insolvency and restructuring, though major economies like China and several EU states have yet to adopt it.

EU Regulation on Insolvency Proceedings (Recast 2015)

Within the European Union, the EU Regulation on Insolvency Proceedings governs cross-border insolvency cases involving EU-incorporated entities. It provides:

• Rules for establishing the Centre of Main Interests (COMI);
• Recognition of insolvency proceedings across EU member states; and
• Secondary proceedings for territorial operations.

Following Brexit, the UK no longer participates, raising new questions about enforcement and coordination in pan-European cases.

Hague Conference Initiatives & Bilateral Treaties

Efforts continue to build global consensus through treaties, protocols and bilateral agreements. These aim to improve recognition, harmonise terminology and reduce forum shopping. 

Centre of Main Interests (COMI) Concept in Cross-Border Insolvency

The concept of COMI is central to many cross-border insolvency frameworks. It determines the “main” jurisdiction for insolvency proceedings and affects recognition, applicable law and enforcement.

While COMI is generally defined as the place where a debtor regularly conducts the administration of its interests, determining it in practice can be contentious, especially for global corporate groups.

Companies may attempt jurisdictional shifts before filing, choosing favourable regimes for insolvency and/or restructuring. This has led to debates around “insolvency tourism,” where entities relocate COMI to access debtor-friendly rules, such as those under English or US law.

Courts increasingly scrutinise such moves, looking for substance over form. International insolvency law practitioners must weigh commercial realities, procedural risks and reputational factors when selecting a filing jurisdiction.

Modified Universalism in International Insolvency Law

Modified universalism is a legal approach that seeks to strike a balance between global cooperation and respect for national sovereignty in cross-border insolvency cases.

It promotes the idea that insolvency proceedings should ideally be handled in a single primary jurisdiction, with other countries assisting and recognising the process, provided it aligns with their legal standards.

This framework facilitates the efficient administration of assets across borders while allowing local courts to intervene if foreign proceedings conflict with domestic public policy. By fostering cooperation among jurisdictions, modified universalism supports fairness, reduces fragmentation and helps maximise value for creditors in multinational insolvency matters.

What Does Modified Universalism Mean in Restructuring?

In restructuring, modified universalism supports coordinated solutions across multiple jurisdictions while respecting each country’s legal autonomy. It encourages courts to recognise and assist foreign restructuring efforts such as moratoriums or debt reorganisations, so long as they don’t conflict with local laws or public interests. 

This approach enables more unified and efficient cross-border restructurings, reduces legal uncertainty and helps preserve enterprise value by avoiding conflicting judgments or duplicative proceedings in differing countries.

Group Insolvency & Consolidation

Global corporate groups present unique challenges, as traditional insolvency law treats each legal entity separately. Yet, business operations, financing and management are often integrated within international corporate groups.

Emerging solutions include:

• Joint Administration: Coordinated but separate proceedings for group members.
• Group Restructuring Plans: Unified plans approved across jurisdictions.
• Substantive Consolidation: Rarely granted, but merges assets and liabilities of group companies in some systems.
• UNCITRAL Model Law on Enterprise Group Insolvency (2019): Encourages alignment and communication among courts and stakeholders.

Cross-border insolvency lawyers must balance the entity’s separateness with commercial reality, ensuring creditor rights are protected while facilitating an efficient resolution.

Key Stakeholders in International Insolvency & Procedural Issues

Cross-border insolvency involves a wide range of parties, including:

• Debtors and corporate boards of directors
• Secured and unsecured creditors
• Bondholders and institutional investors
• Government agencies and tax authorities
• Unions and employee representatives
• Restructuring and insolvency practitioners
• Courts and regulators in multiple jurisdictions

Procedural coordination is vital because such issues as document recognition, language requirements, judicial cooperation, creditor notification, as well as asset tracing and freezing orders, must all be addressed with jurisdictional sensitivity and legal precision.

Cross-Border Asset Recovery & Fraud in Insolvency

Insolvency often reveals misconduct, including fraudulent transfers, asset stripping or concealed liabilities. Cross-border recovery involves:

• Insolvency-related claims (e.g., voidable transactions, wrongful trading)
• Use of common law tools like Mareva injunctions, Norwich Pharmacal orders or Anton Piller searches
• Coordination with criminal investigations
• Cross-border discovery and cooperation agreements

Asset recovery professionals and insolvency counsel must collaborate to uncover and reclaim value, often through parallel litigation or international arbitration.

Corporate Restructuring & Rescue Mechanisms

Many jurisdictions have recently enhanced their corporate restructuring frameworks to promote business rescue and reduce reliance on formal insolvency.

Examples include:

• Chapter 11 (US): Allows debtor-in-possession financing, plan voting by classes of creditors and court oversight.
• Part 26A Restructuring Plans (UK): Offers “cross-class cram-down”, binding dissenting creditor classes.
• Preventive Restructuring Directives (EU): Encourages early intervention and debtor-led restructurings across member states.
• Pre-packs & informal workouts: Widely used in jurisdictions with strong creditor cooperation cultures.

Cross-border legal service providers must design strategies that align with local tools while remaining enforceable across borders.

What is Out-of-Court Restructuring?

Out-of-court restructuring is a voluntary, negotiated process where a financially troubled company works directly with its creditors to reorganise its debt and financial obligations without involving the courts. 

This informal approach aims to stabilise the business, avoid bankruptcy and preserve value by reaching a mutual agreement on revised repayment terms, debt reduction or other financial adjustments. It’s typically quicker, more confidential and less costly than formal insolvency proceedings. However, its success depends on the cooperation and consensus of all major stakeholders involved in the negotiation.

What is a Debt-for-Equity Swap?

A debt-for-equity swap is a financial restructuring tool where a company’s creditors agree to exchange part or all of the debt owed to them for shares in the business. This reduces the company’s debt burden while giving creditors an ownership stake, aligning their interests with the company’s future success.

Often used in distressed situations, this swap can improve a company’s balance sheet, restore solvency and support long-term recovery without immediate cash repayment.

Out of Court Restructuring vs Court-Based Insolvency

When a company faces financial distress, it can pursue either an informal workout or a formal insolvency process. Understanding the distinctions between out-of-court restructuring and court-supervised insolvency is crucial for choosing the most strategic path forward.

• Formality: Out-of-court restructuring is a private agreement between the debtor and creditors, whereas court-based insolvency follows strict legal procedures overseen by a court.
• Speed & Flexibility: Out-of-court processes are typically faster and more adaptable, as they avoid procedural delays and can be customised to suit the needs of all parties.
• Cost: Informal workouts are generally less expensive, as they avoid court fees, administrative costs and legal complexities.
• Transparency: Court proceedings are public, which can damage a company’s reputation, whereas out-of-court restructuring is confidential and may protect business goodwill.
• Creditor Cooperation: Out-of-court restructuring relies on the voluntary consensus of creditors, making it risky if key creditors refuse to cooperate. Court-based processes can bind dissenting creditors once approved.
• Legal Protection: Court insolvency provides statutory protection against lawsuits and asset seizures, whereas informal workouts lack this shield unless formalised through legal mechanisms.

Choosing between these options depends on the specific financial, operational and legal circumstances that the business faces.

ESG Considerations in Cross-Border Restructuring

Environmental, Social and Governance (ESG) considerations are increasingly relevant to restructuring strategies. Governments, investors and stakeholders expect:

• Protection of employee rights;
• Preservation of pensions and social obligations;
• Responsible wind-downs of environmentally sensitive businesses; and
• Transparent communication and fair treatment of smaller creditors.

Corporate boards and cross-border insolvency and restructuring legal teams must now weigh reputational and ethical concerns, in addition to statutory compliance, when shaping restructuring or liquidation plans.

Post-COVID & Future Challenges

The COVID-19 pandemic triggered widespread fiscal intervention and moratoriums on cross-border insolvency proceedings. As these expire, many businesses face delayed distress, now compounded by inflation, interest rate hikes, geopolitical instability and supply chain disruption.

Emerging challenges include:

• Distressed M&A as a resolution mechanism;
• Rising sovereign and quasi-sovereign debt restructurings;
• Cryptocurrency insolvencies and digital asset valuation;
• Climate-related business failures in legacy industries; and
• Cross-border restructuring of platform and gig-economy companies.

International insolvency lawyers must remain adaptive, strategic and jurisdictionally agile to guide clients through this shifting environment.

Conclusion: Legal Coordination for Financial Recovery

International insolvency and restructuring practice is no longer a niche field, but rather a global necessity. As companies expand across borders and capital becomes increasingly mobile, the ability to manage financial distress coherently across different legal systems has become a central aspect of business law.

This guide provides insights from leading experts who understand both the local rules and their global implications. Whether advising debtors, representing creditors, or coordinating cross-border recovery, their perspectives provide the knowledge and tools needed to restructure value, recover assets and rebuild trust in a legally sound and commercially viable way.

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Early Warning Signs of Corporate Distress

And What Directors Get Wrong

Executive Opening

Corporate distress rarely arrives without warning. In most cases, the signs are visible months or even years before insolvency becomes unavoidable. What changes is not the financial reality, but the point at which directors are forced to confront it.

For businesses operating across borders, insolvency risk is magnified. Different jurisdictions impose different duties on directors, recognise distress at different stages, and treat creditor protection very differently. Decisions that feel commercially rational in one country can create personal liability in another.

Insolvency is not just a financial event. It is a legal transition point, and for directors, it is often where responsibility quietly shifts from shareholders to creditors. Missing that moment is one of the most expensive mistakes a business can make.

Where Businesses and Directors Get This Wrong

The most common error is treating insolvency as a cliff edge rather than a sliding scale. Directors often believe liability only arises once a company is formally insolvent. In reality, many jurisdictions impose duties much earlier, when insolvency is probable rather than inevitable.

Another frequent mistake is relying too heavily on group structures. Multinational businesses assume that financial stress can be contained within one entity while the wider group continues operating as normal. In practice, intercompany guarantees, cash pooling, and shared management can quickly blur those boundaries.

Directors also tend to delay action. There is a natural instinct to trade out of difficulty, particularly when recovery appears possible. But continued trading during distress is precisely the period regulators and insolvency practitioners scrutinise most closely.

Finally, boards often underestimate how differently insolvency regimes operate across borders. Assumptions based on home-market experience rarely hold once multiple legal systems are involved.

Jurisdictional Reality Check

In jurisdictions such as the UK and much of Europe, directors’ duties begin to shift as soon as insolvency becomes foreseeable. Continuing to trade without a credible turnaround plan can expose directors to claims for wrongful trading, misfeasance, or breach of duty. Courts often assess decisions with hindsight, focusing on whether losses to creditors increased during the period of distress.

By contrast, the United States places greater emphasis on formal insolvency processes. Chapter 11 restructuring provides tools to stabilise operations, but it also introduces intense scrutiny of management decisions, disclosures, and creditor treatment. Directors who delay filing or favour certain stakeholders risk litigation.

In many Asian jurisdictions, insolvency frameworks are evolving rapidly. Some markets favour rehabilitation and restructuring, while others still prioritise liquidation. Enforcement can be unpredictable, and foreign directors are often surprised by the speed at which authorities intervene once distress is identified.

Emerging markets introduce additional complexity. Regulatory discretion, state involvement, and political considerations can all influence insolvency outcomes. Businesses often underestimate how quickly financial distress can escalate into asset freezes or criminal investigations in these environments.

Cross-Border Insolvency Traps

Cross-border insolvency is rarely coordinated by default. Each jurisdiction assesses distress independently, even where group entities are operationally intertwined.

Problems arise when:

• Cash is moved between entities without clear justification

• One subsidiary continues trading to support another

• Assets are transferred shortly before insolvency

• Creditors are paid selectively across jurisdictions

These actions are often taken with the intention of stabilising the group. In hindsight, they may be characterised as preference payments, undervalue transactions, or breaches of local insolvency rules.

Recognition of foreign insolvency proceedings is another trap. Not all jurisdictions recognise overseas restructurings or moratoriums. A protection granted in one country may be meaningless in another, allowing creditors to enforce locally despite a global strategy.

Acting Too Late: The Point of No Return

Insolvency risk becomes acute when warning signs are rationalised rather than addressed.

Common indicators include:

• Persistent cash flow pressure

• Reliance on short-term financing

• Breaches of lending covenants

• Inability to meet payroll or tax obligations on time

• Increasing creditor pressure

At this stage, directors often focus on survival rather than structure. Decisions are made quickly, documentation becomes informal, and professional advice is delayed. These are precisely the conditions that create personal exposure.

Once insolvency proceedings begin, directors’ actions in the months leading up to that point are examined closely. The question is rarely whether the business failed, but whether losses were unnecessarily increased.

When This Becomes a Serious Legal Problem

Legal risk escalates rapidly once insolvency is likely.

Creditors may pursue directors directly. Insolvency practitioners may investigate historic transactions. Regulators may examine whether statutory duties were breached. In some jurisdictions, failure to act can trigger disqualification or criminal sanctions.

Cross-border businesses face additional scrutiny. Authorities may coordinate investigations, particularly where asset movement or group decision-making is involved. Directors who believed they were shielded by corporate structures can find themselves personally targeted.

For multinational boards, the challenge is not just recognising distress, but recognising when local rules require different responses in different jurisdictions.

Why Local Expertise Is Critical

Insolvency law is deeply jurisdiction-specific. Timing, director duties, creditor rights, and restructuring options vary widely, even between otherwise similar markets.

Local insolvency counsel understand when distress legally begins, what actions are permissible, and how authorities typically respond. They also understand how insolvency intersects with employment, tax, and regulatory obligations in their jurisdiction.

For businesses operating internationally, coordinated local advice is essential. A strategy that protects directors and preserves value in one country can create exposure in another if local nuances are ignored.

Global Law Experts provides access to jurisdiction-specific insolvency specialists who understand both local enforcement culture and cross-border complexity. That insight is often what determines whether distress is managed or allowed to spiral.

Take the Next Step

If your business is experiencing financial pressure, or if early warning signs are beginning to appear, the timing of your response matters as much as the response itself.

Global Law Experts can connect you with experienced insolvency and restructuring lawyers in the jurisdictions relevant to your business, helping you assess risk, protect directors, and identify viable options before choices narrow.

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