How are groups of companies treated on the restructuring or insolvency of one or more members of that group? Is there scope for cooperation between office holders?

Restructuring & Insolvency (3rd edition)

Canada Small Flag Canada

Under Canadian insolvency law, there are two separate forms of consolidation in respect of groups of companies whereby one or more members of such group are subject to insolvency or restructuring proceedings: substantive consolidation, and administrative consolidation.

Substantive Consolidation

Substantive consolidation refers to the consolidation of assets and liabilities of affiliated entities such that the claims of all creditors in respect of the affiliated entities may be jointly satisfied. While not expressly permitted under the BIA or CCAA, Canadian Courts have relied on their equitable jurisdiction pursuant to section 183(1) of the BIA and section 13 of the CCAA to permit consolidation of corporate groups where one or more members of such corporate group are subject to insolvency or restructuring proceedings. In determining whether it is appropriate to do so, Canadian Courts look to determine whether the benefits of such consolidation outweigh the costs on a case-by-case basis with a view to the most efficient proceedings the preservation of assets. Canadian Courts will consider the following factors in determining whether it is appropriate to substantively consolidate companies for the purposes of insolvency or restructuring proceedings:

i) difficulty in segregating assets;

ii) presence of consolidated financial statements;

iii) profitability of consolidation at a single location;

iv) commingling of assets and business functions;

v) unity of interests in ownership;

vi) existence of intercorporate loan guarantees; and

vii) transfer of assets without observance of corporate formalities.

Canadian Courts will look to whether creditors would suffer greater prejudice in the absence of substantive consolidation than the debtors (and any objecting creditors) will suffer from its imposition. Recognizing that substantive consolidation will always threaten to prejudice the rights of creditors to some degree, Canadian courts have utilized the remedy of substantive consolidation where the possibility of economic prejudice that would result from continued corporate separateness outweighs the minimal prejudice that consolidation would cause. The underlying rationale for Canadian Courts’ use of substantive consolidation is to be fair and reasonable in the circumstances each case.

Notwithstanding the foregoing, there has been notable reluctance on the part of Canadian Courts to substantively consolidate members of corporate groups on account of prejudicing certain creditors.

Administrative Consolidation

Administrative consolidation refers to the joint administration of affiliated debtor estates while the assets and liabilities of such debtors are left separate. Administrative consolidation is typically driven by efficiencies and aims to avoid the multiplicity of proceedings while seeking the most expeditious and least expensive determination of claims.

Neither the BIA nor the CCAA prohibit the administration of affiliated debtor estates by a single party, however, consistent with Canadian Courts’ utilization of the doctrine of substantive consolidation, Courts rely on their equitable jurisdiction pursuant to Canadian insolvency statutes to order the consolidation of debtor estates for administration purposes, as appropriate. As is the case with the doctrine of substantive consolidation, Courts seek to balance the benefits and costs of administrative consolidation in light of the various stakeholders in determining whether it is appropriate to order such consolidation.

British Virgin Islands Small Flag British Virgin Islands

There are no specific provisions of the IA that deal with the restructuring or liquidation of groups, though it is possible that an arrangement could be tailored towards rescuing a group of companies in financial difficulties. In such a situation, the relevant approvals would be needed from the different classes of stakeholder and (save in the case of creditors’ arrangements) the court would need to be satisfied that the arrangement satisfied the relevant requirements. Although a creditors’ arrangement might be formulated to rehabilitate a group of companies, there might be a greater risk that a disgruntled shareholder or creditor might allege that their interests were unfairly prejudiced.

Cayman Islands Small Flag Cayman Islands

In the absence of any material conflicts of interest between the estates and where appropriate to do so, the Cayman Court may appoint the same liquidators to different companies within the same group. However, this does not result in a consolidation of the estates and the assets of each will not be pooled, but will be separately distributed amongst the creditors with claims against each estate. An additional "conflict" liquidator may be appointed over one of the estates to deal with any issues of conflict between the estates.

Where different liquidators have been appointed to companies within the same group, stakeholders and the Court will expect a degree of cooperation between the estates on matters of common interest, but there is no legislative framework for cooperation.

China Small Flag China

There’s no explicit provisions in China’s bankruptcy law on consolidated bankruptcy of members of a company group. Chinese courts respect the independent legal person status of each group member, and, as a basic principle, treat the bankruptcy of each member as an isolated case. Only when the insolvent members of a company group are inextricably intertwined, and separation between their assets would result in unreasonably high costs and severely prejudice the creditors’ rights to a fair compensation, will the courts handle the bankruptcy cases of the members on a substantively consolidated basis. If more than one member of a company group has a ground to be bankrupted, but their bankruptcy cases are not qualified to be heard on a substantively consolidated basis, their courts may coordinate with each other how their bankruptcy cases will be heard based on the applications of relevant parties and taking into account the efficiency of hearing, the order of the bankruptcy filings, the scale of each insolvent member and the location of the controlling member, among other concerns, and then request their common higher-level court to designate a court to hear all these bankruptcy cases. In practice, to facilitate the disposal of the assets and dealing with the debts of group members of which the bankruptcy cases are heard on a substantively consolidated basis, the hearing court usually appoints the same administrator for all the members involved.

Denmark Small Flag Denmark

When insolvency proceedings commence against a company, it is treated as an independent legal entity. This means that the remaining part of a group is not affected by the insolvency.

If restructuring or proceedings are commenced against more companies of the same group, it will often be the same trustee or restructuring administrator who administers the estates.

Group companies are not entitled to vote in restructuring proceedings.

France Small Flag France

The French insolvency regime did not include specific rules tailored for corporate groups until Law No. 2015-990 dated 6 August 2015.

Before that, insolvent corporate groups were obliged to initiate separate plenary insolvency proceedings for individual companies. This new law created specialised commercial courts which have jurisdiction in case of large insolvency cases. If a specialized commercial court has jurisdiction over the parent company, it will also have jurisdiction over its subsidiaries.

In addition, the corporate veil may be lifted and insolvency proceedings initiated against a company may be extended to another company on the ground either that (i) the debtor is held to be a fictitious legal entity, or (ii) that the assets and liabilities of the parent company and those of its subsidiary are so intertwined that they should be deemed to be one single entity.

Finally, European law tends to take into consideration the existence of a corporate group. EU Regulation 2015/848 of the European Parliament and of the Council dated 20 May 2015 has introduced a group co-ordination proceeding between all courts before which an insolvency proceeding is opened by an entity of a group.

Germany Small Flag Germany

“One debtor, one estate, one procedure” – this characterizes one of the main principles of German insolvency law. Affiliated companies that are in distress and/or insolvent are generally liquidated or restructured in separate proceedings.

However, the Insolvency Proceedings of Corporate Groups Improvement Act (Gesetz zur Erleichterung der Bewältigung von Konzerninsolvenzen) came into force in 2018 and allows for concentration of group insolvencies (at least for group companies with their COMI in Germany) in the same competent court, with the same judge and the same (preliminary) insolvency administrator.

In addition, so-called coordination proceedings (Koordinationsverfahren) have been enacted as an additional option for group insolvencies. In case different insolvency administrators or monitors have been appointed, these proceedings allow appointing a coordinator of proceedings (Verfahrenskoordinator) who can draw up a coordination plan for the group as a whole in order to ensure concerted restructuring or liquidation measures. In cross-border group insolvencies, the involved insolvency administrators often enter into so-called protocols which can serve a similar purpose.

These new German rules confirm and further facilitate what had been common practice in many insolvency proceedings regarding group companies anyway. They do not change the basic principle that the insolvency proceedings regarding one debtor have to achieve the best results for this debtor’s creditors.

Bermuda Small Flag Bermuda

Proceedings for the insolvencies and re-organisations of a group of companies may occur concurrently for practical efficiency but remain legally separate proceedings. In the absence of a scheme of arrangement or other consensual arrangement between the group of companies and their creditors, the assets of the companies are generally not pooled for distribution.

Guernsey Small Flag Guernsey

Guernsey recognises and maintains the limited liability of companies. Only in very specific circumstances would debts/assets be pooled across a group in insolvency. However, a group company may be liable by virtue of challenges to antecedent transactions.

Ireland Small Flag Ireland


In an examinership, the Court can appoint the Examiner to a related company or related companies at the same time or thereafter (provided any related company also has its COMI in Ireland), where it is satisfied that:

  • the making of the order in respect of a related company would be likely to facilitate the survival of the insolvent company as a going concern; and
  • there is also a reasonable prospect that the related company and the whole or any part of its undertaking is capable of surviving as a going concern.


Related Irish companies are generally not wound up as a group. However, where two or more related companies are being wound up the liquidators, creditors and / or contributors of those companies can apply to court for a pooling order whereupon the assets of the related companies are pooled and the companies are wound up together as if they were one company. The court must have regard to the following (a) the extent to which any of the companies took part in the management of the other companies, (b) the conduct of the related company towards the creditors of the other companies (c) the extent to which the circumstances that gave rise to the winding up of any of the companies is attributable to the acts or omissions of any of the other companies and (d) the extent to which the business of the companies have been intermingled.

Cross-border group insolvency in EU

The Recast EU Insolvency Regulation (Regulation (EU) 2015/848) introduces a framework for group insolvencies. It provides for voluntary co-ordination between office holders in order to achieve a greater chance of rescuing the entire group. Where utilised, insolvency practitioners from different jurisdictions will co-ordinate a restructuring plan and seek a stay on enforcement mechanisms. The duty to co-ordinate shall exist to the extent that it is not incompatible with local procedural rules and does not give rise to any conflict of interest. The framework envisages one court co-ordinating the group coordination plan with one insolvency practitioner acting as group co-ordinator. Insolvency practitioners in member states can refuse to participate in the group coordination proceedings and therefore, the coordination plan will only be effective where it is consensual.

Jersey Small Flag Jersey

  1. There are no specific provisions in Jersey law for the restructuring or insolvency of companies within groups or groups of more than one company. Particular arrangement may be available on a case by case basis.

Mexico Small Flag Mexico

The Insolvency Law has very little regulation concerning corporate groups. While Mexico does not recognize or give effect to the principles of substantive consolidation, it does provide for some level of procedural consolidation. The insolvency of affiliates will be jointly administered by the same courts, but under different dockets.

Peru Small Flag Peru

The Insolvency Act provides that each individual company must meet the requirements to be declared insolvent; accordingly, it is not pertinent to examine insolvency based on groups of companies.

However, there is an exception with Peruvian branches of foreign companies or organizations, as these branches can be declared insolvent under the Insolvency Act and, in addition, the creditors of such branches may file legal actions against the assets of the parent company located in a foreign country.

Poland Small Flag Poland

There is space for cooperation between office holders in the case of groups of companies treated on the restructuring or insolvency of one or more members of that group, but informally, given there is no direct legal basis for such activities. Restructuring and insolvency of groups of companies is regulated under the EU Law only and it touches international cases, not domestic groups of companies.

Singapore Small Flag Singapore

The companies within a group are still treated as individual legal entities, and must still file separate restructuring or insolvency applications.

On a practical level, the Singapore Courts will usually assign a single judge to hear all applications relating to the same group of companies, and applications involving different companies within the same restructuring efforts are usually heard together. Further, the one of the factors that the Court will look at in deciding whether to approve the appointment of an insolvency practitioner is whether duplicate costs can be avoided. It is thus common for the same insolvency practitioner to be appointed in respect of multiple companies in the same group.

In addition, where a company proposing a scheme of arrangement has obtained a moratorium, related companies are entitled to apply to Court to obtain similar protection.

Sweden Small Flag Sweden

Swedish insolvency or reorganization law do not recognise the corporate group concept, and legal entities are treated as single entities with their own respective creditors. Directors representing more than on company in the same group must always consider the interests of creditors in relation to that individual company.

Both in restructurings and in bankruptcy proceedings, one and the same administrator or official receiver will often be appointed for all group entities involved, for the purpose of co-ordination and efficiency.

Switzerland Small Flag Switzerland

Swiss insolvency law does not recognize the concept of substantive consolidation. Hence, separate insolvency or restructuring proceedings will have to be initiated for each member of a corporate group (which, itself, cannot be the subject of insolvency proceedings). That said and pursuant to Art. 4a DEBA, Swiss insolvency authorities are held to coordinate their actions to the extent possible in a group insolvency. As part of such coordination it would, inter alia, be possible to appoint one sole administrator in the insolvency proceedings of affiliated companies within the same group. Moreover, Art. 4a DEBA allows that the insolvency courts and authorities competent for one group entity are assigned exclusive jurisdiction for all affected group members in Switzerland, subject to prior agreement of all involved parties. There is, however, still little guidance as to how such coordination is handled in practice as the provision of Art. 4a DEBA is rather new. A similar legal basis has recently been introduced for coordination in international group insolvencies, providing that in proceedings which are related in substance the Swiss authorities have to coordinate among themselves and with foreign office holders.

Spain Small Flag Spain

Regarding the restructuring proceedings, in the refinancing agreement with banks and other financial entities regulated in article 71 and Additional Provision 4º of SIA, the credits that has any company of the group against others of the same group, will be individualized. However, these debts will not be computed as a liabilities of the insolvency proceeding.

Regarding the treatment of group of companies in a insolvency proceeding, first of all, article 6.2.2 of SIA establishes that if the insolvency company is a member of a group of companies, it will have to be indicated in the petition of the DIP and it will be necessary to attach the consolidated annual accounts, the management reports of the last 3 financial years and the audit report issued with regard to those accounts shall also be attached, as well as a report stating the operations performed with other companies of the group during the same period (art. 6.3.4 SIA).

The SIA allows to apply the DIP of group of companies for the whole group. Furthermore, it is allowed that one or some of the members of the group of companies, individually apply for the DIP. However, if the parent company is declared insolvent, the insolvency proceeding of the subsidiaries companies shall be grouped in the same proceeding of the parent company (art. 25 bis SIA). In addition, it is possible forming a group of subsidiaries which will be added to the insolvency proceeding that has more liabilities (art. 25.3 bis SIA).

Finally, article 93 of SIA considers subsidiaries companies as persons specially related to the insolvency debtor. It implies that the credits between the companies of the group could be qualified as a subordinated claims.

United States Small Flag United States

Generally, each company that becomes insolvent or files a chapter 11 case is treated as an independent legal entity and the remaining members in the corporate group are not affected. The Code also does not impose additional obligations on the entire corporate group when one or more entities comprising it commence(s) a restructuring case.

It is common for all, or substantially all, entities in a corporate group concurrently to commence chapter 11 cases. In such instances, the Code permits a procedural mechanism, known as joint administration, which allows all of the individual chapter 11 cases to be administered together for procedural convenience.

Often, many of the same individuals serve as directors and officers of all of the entities comprising a corporate group, and in the event that some, but not all, of these entities commence chapter 11 cases, the affected directors and officers may need to evaluate whether a conflict of interest exists, and if so, resign from one or more positions and/or boards.

United Kingdom Small Flag United Kingdom

Under English law, each company in a corporate group is treated as a single entity and its directors are required to consider the interests of creditors in relation to that particular company (rather than the group as a whole). Unlike in Chapter 11, we do not have a formal concept of group proceedings / joint debtors, or substantive consolidation. However, the commercial reality is that what is beneficial for a group is often beneficial for each individual company, and there is scope for co-ordination between affiliated entities.

The Recast European Insolvency Regulation makes specific legislative provision to try to facilitate co-ordination between officeholders (albeit on a voluntary basis).

Hungary Small Flag Hungary

Under the Hungarian law each liquidation proceeding shall be commenced separately against the legal entity. Besides, Section 3:59 of the Civil Code establishes underlying liability of the dominant member of the group of corporations. If any controlled member of the group is undergoing liquidation, the dominant member shall be held liable for any outstanding debt the member may have. The dominant member shall be relieved of liability if it is able to verify that the controlled member’s insolvency did not arise as a consequence of the group’s common business strategy.

Under Hungarian law each bankruptcy proceeding shall be commenced separately against the legal entity, hence there is no automatic group insolvency proceeding.

Belgium Small Flag Belgium

The new insolvency code introduces the concept of cooperation in the event of the insolvency of a member of a group of company with the appointment of one coordinating judge. While this still does not permit consolidated group procedures, it may result in savings in time and costs and reduce conflicts of interests.

Israel Small Flag Israel

According to the Israeli legal system, each company in a group of companies treated as an independent legal entity. Accordingly, the Courts ensure that for each company in a corporate group, a separate insolvency proceeding would be managed.

Therefore, officers of a company must only act in the best interest of the company which they serve, and each unit in a corporate concern must act in its own best interest as an independent profit-maximizing center. However, in extreme, unusual cases, Court rulings may order to pierce the corporate veil between companies and to attribute to one company the debt of another company in the concern.

When the Court finds that a group of companies, controlled by the same shareholder, was managed with mixing of financial operations, the Court would tend to attribute all debt to all companies and to issue a joint liquidation order.

Romania Small Flag Romania

The companies involved in such a procedure, will be treated independently regarding the insolvency procedure and the procedures related to the insolvency. This means that the remaining part of a group is not affected by the insolvency of a company within the group. For this type of companies, the law, allows them to stick at the common petition to insolvency, in which case, the claim will be approved.

Even if it will operate a legal prorogation of jurisdiction, the competent court will create a file for each company and appoint judicial administrators.

The Norms regulating the insolvency of the group of companies were enacted by a need to have a joint approach in the case of complex groups of companies. Until Law 85/2014 there were not available such specific instruments for the restructuring or liquidation based on the economic logic of the business. These provisions are meant to ease the restructuring procedures and the sale of assets belonging to a sole entity.

Updated: June 5, 2019