bc8G2-7

DATA NOTES
141
TABLE 14.14 What do the indicators
on the strength of the insolvency
framework measure?
Commencement of proceedings index (0–3)
Availability of liquidation and reorganization to
debtors and creditors
Standards for commencement of insolvency
proceedings
Management of debtor’s assets index (0–6)
Continuation and rejection of contracts during
insolvency
Avoidance of preferential and undervalued
transactions
Post-commencement credit
Reorganization proceedings index (0–3)
Approval and content of the reorganization plan
Creditor participation index (0–4)
Creditors’ participation in and rights during
liquidation and reorganization proceedings
Strength of insolvency framework index (0–16)
Sum of the commencement of proceedings,
management of debtor’s assets, reorganization
proceedings and creditor participation indices
mature) is used; 0.5 if the balance
sheet test (the liabilities of the
debtor exceed its assets) is used;
1 if both the liquidity and balance
sheet tests are available but only
one is required to initiate insolvency
proceedings; 0.5 if both tests are
required; 0 if a different test is used.
The index ranges from 0 to 3, with
higher values indicating greater access
to insolvency proceedings. In Bulgaria,
for example, debtors can initiate both
liquidation and reorganization proceedings
(a score of 1), as can creditors (a
score of 1). The standard for commencing
insolvency proceedings is that the
debtor cannot pay its debts as they
mature (a score of 1). Adding these
numbers gives Bulgaria a score of 3
on the commencement of proceedings
index.
Management of debtor’s
assets index
The management of debtor’s assets
index has 6 components:
• Whether the debtor (or an insolvency
representative on its behalf)
can continue performing contracts
essential to the debtor’s survival.
A score of 1 is assigned if yes; 0 if
continuation of contracts is not
possible or if the law contains no
provisions on this subject.
• Whether the debtor (or an insolvency
representative on its behalf) can
reject overly burdensome contracts.
A score of 1 is assigned if yes; 0 if rejection
of contracts is not possible.
• Whether transactions entered into
before commencement of insolvency
proceedings that give preference
to one or several creditors can be
avoided after proceedings are initiated.
A score of 1 is assigned if yes;
0 if avoidance of such transactions
is not possible.
• Whether undervalued transactions
entered into before commencement
of insolvency proceedings can be
avoided after proceedings are initiated.
A score of 1 is assigned if yes;
0 if avoidance of such transactions
is not possible.
• Whether the insolvency framework
includes specific provisions that allow
the debtor (or an insolvency representative
on its behalf), after commencement
of insolvency proceedings, to
obtain financing necessary to function
during the proceedings. A score
of 1 is assigned if yes; 0 if obtaining
post-commencement financing is
not possible or if the law contains no
provisions on this subject.
• Whether post-commencement financing
receives priority over ordinary
unsecured creditors during distribution
of assets. A score of 1 is assigned
if yes; 0.5 if post-commencement financing
is granted superpriority over
all creditors, secured and unsecured;
0 if no priority is granted to postcommencement
financing.
The index ranges from 0 to 6, with
higher values indicating more advantageous
treatment of the debtor’s assets
from the perspective of the company’s
stakeholders. In Rwanda, for example,
debtors can continue essential contracts
(a score of 1) and reject burdensome
ones (a score of 1) during insolvency
proceedings. But the insolvency
framework contains no provisions on
either preferential transactions (a score
of 0) or undervalued ones (a score of
0). Post-commencement financing is
available under the laws of Rwanda (a
score of 1) and receives priority only over
ordinary unsecured creditors (a score of
1). Adding these numbers gives Rwanda
a score of 4 on the management of
debtor’s assets index.
Reorganization proceedings
index
The reorganization proceedings index
has 3 components:
• Whether the reorganization plan is
voted on only by the creditors whose
rights are modified or affected by the
plan. A score of 1 is assigned if yes;
0.5 if all creditors vote on the plan,
regardless of its impact on their
interests; 0 if creditors do not vote
on the plan or if reorganization is not
available.
• Whether creditors entitled to vote
on the plan are divided into classes,
each class votes separately and the
creditors within each class are treated
equally. A score of 1 is assigned
if the voting procedure has these 3
features; 0 if the voting procedure
does not have these 3 features or if
reorganization is not available.
• Whether the insolvency framework
requires that dissenting creditors receive
as much under the reorganization
plan as they would have received
in liquidation. A score of 1 is assigned
if yes; 0 if no such provisions exist or
if reorganization is not available.
The index ranges from 0 to 3, with
higher values indicating greater compliance
with internationally accepted