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When Liquidation is Not an Option: A Global Study on Local Public Entities in Financial Distress

This research project analyses the impact of the financial distress of local public entities (LPEs), and offering a global overview of the treatment of ongoing executory contracts.

Emilie Ghio's research looks into local public entities


Research background

This research project analyses the impact of the financial distress of local public entities (LPEs). LPEs are not limited to local authorities but include any entities providing essential public services.

This project also makes reference to state-owned enterprises (SOEs) to the extent that the discipline of their contracts is strictly linked to or affected by the rules applicable to LPEs in distress.

The commencement of insolvency or special procedures to deal with their distress impacts on local and national communities in a more disruptive manner than many ‘traditional’ corporate cases. Coupled with the lack of global studies and guidance on these issues, these considerations suggest the need to undertake this project.

This project is funded by INSOL International.

Research aims

The treatment of LPEs in distress is a significantly under-researched area of insolvency and public law, particularly outside the US. However, the financial collapse of these entities frequently has a domino effect on the private sector, as well as on local, regional and national communities. Insolvency practitioners tend to know little about how LPEs in financial distress are managed. Globally, insolvency laws pertaining to LPEs are heavily influenced by local traditions, cultures and historic developments.

This project offers, for the first time, a global overview of the treatment of ongoing, executory contracts, should LPEs file for formal insolvency or turnaround procedures.

This project is the first to examine the treatment of distressed LPEs on a global scale and the first to attempt to articulate unifying principles and standards for the laws and regulations governing the financial distress of LPEs. This project also seeks to include participants from countries with varied economic and governmental structures.

How has the research been carried out?

The project focuses on four geographical regions: Europe, Asia, Africa and the Middle East, and the Americas. Data and information is gathered by participants in the project located in the following jurisdictions:

  • Africa/Middle East: Ghana; Nigeria; South Africa; Uganda; UAE
  • Americas: Argentina, Brazil, Canada, US
  • Asia: Australia, Bangladesh, China, Japan, Singapore
  • Europe: Belgium, Croatia, France, Germany, Greece, Italy, the Netherlands, UK

[Emilie is the researcher drafting the report for France].

Outcomes and impact

This project is highly topical. In periods of financial distress, governments are keen on reducing transfers of funds to local, regional and national communities, thus directly or indirectly causing situations of financial distress to many LPEs.

Currently, LPEs in financial distress are little chartered, leading to uncertainty and problems to mitigate financial risks. Having a legislative framework capable of dealing with these challenges is an urgent and imperative need for many governments.

  • National reports aimed at practitioners with detailed guidelines on the impact that the financial distress of LPEs has on ongoing, executory contracts;
  • Final report aimed at academic and regulatory agencies with recommendations for minimum standards of regulation.