Debtors in possession: a comparative legal study of the role of debtors in US, EU and Dutch restructuring and insolvency law

Abstract

The paradigm shift from piecemeal liquidation to (preventive) restructuring has furthered the rescue of financially distressed but viable businesses. This development has also prompted changes in the governance of restructuring and insolvency processes. It promotes that debtors are not mandatorily and fully divested in favour of an independent and impartial practitioner. Instead, restructuring and insolvency laws increasingly provide for one or more processes where a debtor – often referred to as a debtor in possession (DIP) – remains at least partially in control of its assets and day-to-day activities.

To date, the specific role of debtors in the governance of restructuring and insolvency processes has received limited scholarly attention. This is notable, as the concept of the debtor as a DIP raises various legal and practical questions: how should a DIP be legally characterised? Which debtors should be eligible to qualify as a DIP? What are a DIP’s rights and duties? What mechanisms are appropriate or required to supervise a DIP? In addition, under what conditions should a debtor terminate as DIP?

This book explores these questions through a comparative legal analysis of DIPs in US, EU and Dutch restructuring and insolvency law. It proposes a model for DIP governance in restructuring and insolvency processes and distinguishes between the governance of different types of DIPs.