Transparency in Corporate Groups

This Article addresses a remarkable blind spot in American law: the failure to apply the well-established principles of secured credit to prevent inefficiency, confusion, and fraud in the manipulation of the webs of subsidiaries within corporate groups. In particular, “asset partitioning” has been a fashionable subject in which the central problem of non-transparency has been often mentioned but little addressed. This Article offers a concept for a new system of corporate disclosure for the benefit of creditors and other stakeholders. It would require disclosure of corporate structures and allocations of assets among affiliates to the extent the affiliates are to be treated as independent legal entities. Enforcement would follow the secured creditor model: the failure to follow the rules would lead to disregard of corporate independence. Modern secured credit law is subject to many criticisms, but the emerging versions of credit security transparency found around the world have increased both efficiency and fairness in commercial transactions. Its example suggests the basis for reforms to achieve an analogous result for the extension of credit to groups of corporations, especially in international finance where partitioning is often used in lieu of secured financing. The long-term objective is to create a body of scholarship examining this problem and to propose a regime of corporate responsibility and transparency to correct it

A Global Solution to Multinational Default

A new world is slouching toward New York and London, Beijing and Bangkok, to be born. If our planet and our values survive the secondary effects of that emergence, we may look forward to a humanity more prosperous and more integrated than at any time in human history. The force that drives us to that future is free-market capitalism constrained in the vessel of democratic institutions. One important element in its progress is the fashioning of an international system for managing the financial crises that are one of the free market\u27s inevitable consequences. In this symposium, we debate which is the best such system we can devise

Comment: A More Optimistic View of Cross-Border Insolvency

In re Axona and In re Maxwell Communication Corp, along with other cases in other jurisdictions, demonstrate a remarkable level of cooperation in international insolvency in comparison with the discouraging results accepted as inevitable just a few years ago. When one considers these concrete results in the courts in conjunction with the rapidly expanding international initiatives for reform in this field, the prospects seem distinctly ungloomy