Kroll Restructuring Administration Overview
Kroll is a global leader in complex compliance, investigative, cyber security and risk management solutions. Amongst these, the company offers restructuring administration services for creditors and facilitators of such restructurings. As part of this service, Kroll provides legal notices of the administration. This is carried out on top of a number of other services, including the production of claims/ballots, convening and chairing meetings, supporting SIPP special insolvency practitioners’ procedure and assisting with asset realisations or distributions.
The term "restructuring administration" is somewhat misleading in that it doesn’t necessarily mean a company will survive a failure, however it does provide an alternative to the more commonly used administration procedure. Restructuring administrations are generally appointed to deal with any potential "insolvency" issues without formal insolvency proceedings . Companies may seek this alternative as formal insolvency proceedings can often be disruptive to how their business is run, as well as difficult for owners and investors to accept.
Companies therefore have the option to take a more coordinated approach to its restructure by utilising restructuring administration. Its role is to lead and manage this process for the benefit of all stakeholders. The company would then work with its creditors and shareholders to agree a voluntary arrangement or a scheme of arrangement, which is approved by a majority of those stakeholders and memorialised by an order of the Court.
It should be noted that restructuring administration is NOT a recognised legal term and rather it’s the name used by Kroll for the services it offers under a special administration.
Legal Notices Explained
A legal notice is any notice which is legally required to be given regarding any legal proceedings which are taking place, whether that be a pending lawsuit and/or any legal proceedings before the court. When a company embarks on a restructuring or insolvency procedure, it becomes necessary to provide notice to the general public, as well as to everyone who may have an interest in the proceedings (which will be referenced below), about the consequences of the restructuring with regard to the debt of the company undergoing the restructuring.
A legal notice will be published through one or more public forums, normally newspapers with wide circulation. The approaches to publication must be carefully considered, particularly because the courts will expect that the content and publication of legal notices will be carefully monitored, and that they will be reasonable, complete, and appropriate in context. Careful drafting is important because any ambiguity could lead to problems with the acceptance of the legal notice, or worse, criticisms or challenges to the restructuring itself.
Different Types of Restructuring Legal Notices
There are various types of legal notices that may be published during a restructuring: A notice to creditors, for example, may announce the appointment of the liquidator, the start of any applicable deadline to file a claim with the liquidator or to object to a claim, or the deadline to register a dissent. A notice to clients of a regulated entity—e.g., a lawyer, accountant, or medical doctor—may advise the clients of the closing of the practice, the termination of the retainer, how to obtain their files, and when to contact the liquidator if they think their interest has been infringed for the purpose of commencing a claim to be added to the list of creditors. A notice to shareholders may be more of an education notice. It may explain what is meant by being a shareholder in a company in Canada, the legal status of the company under the circumstances, the steps that shareholders will need to take to be removed from the register, and when a creditor may expect to be paid. In addition to the basic administrative purposes, the above are useful tools in mitigating the risk of a claim against the liquidator for failing to have given the notice required by the Bankruptcy and Insolvency Act (Canada) or the Companies’ Creditors Arrangement Act (Canada).
Approach of Kroll for Restructuring Legal Notices
At Kroll, our approach to reconciling restructuring legal notices with accurate data is driven by our determination to act as an agent for our clients, and our position at the cross-roads of data and insolvency procedures – we are uniquely positioned to bring the two together. Kroll brings together the experts in both areas, data governance and restructuring, and this makes us more than just a service provider: it means we are a partner who can provide a client with solutions and expertise at both ends of a process, preparation and execution. The combination of our proactive data management, supply chain expertise and the experience we have from administering thousands of businesses in difficult circumstances means that we have a clear understanding the sensitivities involved. Producing a restructuring legal notice involves dealing with a wide variety of qualitative and quantitative information, from understanding the legal requirements through to populating the notice with the correct data on creditors, or rules around how to aggregate contacts. In addition to the oftentimes complex requirements under Chapter 11 of the United States Bankruptcy Code we have years of experience in servicing courts across Germany, Denmark, England, Spain, Australia, New Zealand and the rest of Europe. Working together with our clients and departments of justice we have produced some of the most effective website services and systems to manage the tricky processes associated with complex legal notices. By keeping a tight control over records, or digitizing paper records, we provide our clients with access to a clear and unambiguous record of stakeholders for the purpose of producing a reconstruction legal notice. From being able to report on the number of notices issued, to tracking hard copy receipts or opening of e-notices, we make sure the whole process is transparent to our client. There are also challenges that arise in determining the place of effective management of debtors, and Kroll has many years of expertise in this area. There are a number of ways to identify the jurisdiction under which restructuring legal notices must be sent, or a company currently trading under – often time zone differences when contacting overseas phone numbers or pricing differences when producing English and other language offers on products or websites can affect where sales are booked and where the place of appraisal should be for purposes of assessment of stakeholder value. Having local knowledge in key operating markets allows Kroll to handle any issues that may arise in this area, something that could add further complexity to a restructuring situation. Our visibility across the market, and our scale, allows us to cope with the demands of a wide range of corporate actions, whether it is the issuing of construction bonds through to the winding up of large public corporations. With Kroll, you have a partner who can deliver results without compromising on quality or cost.
Effects of Legal Notices on Stakeholders
The spectrum of stakeholders and their respective needs means that we are required to draft a variety of legal documents, often in a limited timeframe. Our clients include banks, private and secured creditors, pension funds, central banks, interim managers, investors, management and employees.
Many of the documents concern the appointment notices of administrators, giving specific information about the company itself, the names of its connected parties and recent developments in the lead up to insolvency, as well as instructing accountants to gather and hold information on the company. The legal notices also warn the public against dealing with the company in administration , and in particular against any payments made to the company. The notices warn potential creditors of the ability for administrators to claw back money paid to creditors over the previous six months, as well as point to a list of administrators who will handle the insolvency, which can prevent the company from appointing different administrators. Because failures to comply with legal requirements may give rise to a claim for damages against administrators personally, our practice is to ensure that drafts of notices are distributed in advance to senior managers or company boards for review.
Legal and Compliance Issues Summary
The legal and compliance considerations surrounding the issuance of restructuring legal notices take on added importance in the context of the various regulatory frameworks that must be adhered to by Kroll Restructuring Administration, as a division of Kroll, Inc., domiciled in the United States and servicing similar clients in Canada and other global jurisdictions.
In Canada, the Office of the Superintendent of Bankruptcy (OSB) supervises the insolvency process, including monitoring the activities of trustees in bankruptcy. Further to the Bankruptcy and Insolvency Act (BIA), the OSB maintains a national database for insolvency filings – the National Insolvency Search System (NISS). The NISS has up to five years’ worth of insolvency filings and can be used to determine if and when an individual or business has had a bankruptcy in Canada.
Considering an individual is automatically discharged after 9 months, filing in the NISS can help determine whether a bankruptcy is fresh and whether the individual is credit worthy.
Kroll Restructuring Administration most frequently distributes restructuring legal notices in the BIA and Companies’ Creditors Arrangement Act (CCAA) processes where a meeting of creditors is required. In the BIA, the notice to creditors or "formal notice" is often hand delivered as opposed to in electronic form so that it can be issued in accordance with the process, but typically, the department will email official notices in the CCAA process.
For a BIA process, the notices are typically the first formal communication that a creditor receives once an individual or corporation has filed. In the CCAA process, legal notices are usually issued following an Initial Order (IO) when the business is monitored or remains solvent or following the Approval and Vesting Order (AVO) once the business has moved into the liquidation phase.
In the BIA process, similar rules apply to the CCAA process whereby the notary public, who signs the Individual Assignment from the debtor, attests to the fact that justification has been provided as to the financial reasons contributing to the insolvency.
In the simple case, Kroll Restructuring Administration issues the legal notices based on the information provided by the debtor and collects all related materials under its role as trustee. However, for more complex trustee appointments, there is an additional compliance requirement whereby the subscribers to the website have representations from the debtor with respect to the accuracy of the information provided to Kroll Restructuring Administration.
Case Studies of Legal Notices
Kroll Restructuring Administration has successfully managed the legal notices for many complex restructurings and reorganisations around the world. One such case was Provident Financial. Its customers owed defaulted loans of £900 million at the time the restructuring was announced.
The Provident Financial restructuring was designed to establish a more efficient financial group structure that would facilitate future development of the business and increase returns to shareholders. In addition to a global debt footprint, Provident also had a range of equity obligations, including one private institution in Brazil. After consultation with the existing restructuring advisers, Kroll Restructuring Administration was appointed to source a suitable service provider to deal with the global DPO, assisted by the sorting centre in Prague. Documents were sent out in batches and responses returned within 97 days, compared to the 90 days the Trustee was given.
The UK group had 37,000 creditors to deal with. Kroll Restructuring Administration established a dedicated email folder with an automated response service, which enabled creditors to see their query had been received and give them feedback on timelines. All claims were scanned and returned, with those that were not needing to be accepted on the basis of a non-compliance letter (signed by the creditor) being established. A telephone hotline was set up to call off any unknown numbers, particularly those not dealing with Provident Financial. Having a call handler record claim details after having already been validated through the telephone system met the creditor’s information requirements without unnecessary duplication. email.
In Hong Kong, Kroll Restructuring Administration worked with the local administration to appoint a Hong Kong agent, while managing the rest of the global claim processing from Prague. The Prague operation was able to scan 4,500 documents (more than 90 per cent of which were valid), then grading them as a ‘claim’, ‘non complaint letter’ or ‘further info required’. Kroll provided the Hong Kong agent with not only the 4,500 claims, but also the 10,000 that did not adhere to the global format. This helped the agent to take a decision and issue its letter of an arrangement within the 7 week statutory deadline after the publication of the scheme.
The number of claims allowed was 72 per cent and exceeded the 60% required for confirmation. Kroll has also been involved in other successful cases including the DC Partners, Petroplus, Hypercese and Tenet cases.
Key Takeaway and Future Perspective
In conclusion, it is clear that Kroll Restructuring Administration Legal Notices play an invaluable role in the restructuring process. They provide critical information to creditors, stakeholders, and the general public at large. The format and accessibility of these notices via digital platforms and social media channels make it easier for individuals to become informed participants in the restructuring process.
As we look to the future, we must consider how the landscape of finance and restructuring will continue to evolve. With the increasing importance of real-time communication and the consumption of information through digital means , we can expect that Kroll Restructuring Administration Limited will further adapt and enhance the way it disseminates legal notices. While the fundamentals of legal notices remain consistent, the methods and platforms that deliver them are increasingly dynamic.
Understanding the past and current role of Kroll Restructuring Administration Legal Notices should offer creditors, stakeholders, and all those who need accurate and timely information, the comfort that these notices will continue to evolve to meet their needs.
