France’s Subnational Insolvency Framework (original) (raw)
Related papers
Subnational Insolvency: Cross-Country Experiences and Lessons
Subnational insolvency is a reoccurring event in development, as demonstrated by historical and modern episodes of subnational defaults in both developed and developing countries. Insolvency procedures become more important as countries decentralize expenditure, taxation, and borrowing, and broaden subnational credit markets. As the first cross-country survey of procedures to resolve subnational financial distress, this paper has particular relevance for decentralizing countries. The authors explain central features and variations of subnational insolvency mechanisms across countries. They identify judicial, administrative, and hybrid procedures, and show how entry point and political factors drive their design. Like private insolvency law, subnational insolvency procedures predictably allocate default risk, while providing breathing space for orderly debt restructuring and fiscal adjustment. Policymakers’ desire to mitigate the tension between creditor rights and the need to maintain essential public services, to strengthen ex ante fiscal rules, and to harden subnational budget constraints are motivations specific to the public sector.
The breach of public policy is the sole reason in terms of the Regulation that justifies the exceptional refusal of an EU Member State to recognize the main insolvency proceedings and grant their effects. However, the application of ordre public in this connection is more than questionable. It is doubtful whether the EU Member States may in an individual case deny effects to a European regulation as a significant and directly applicable source of European law, which is simultaneously a source of its own law, and whether such approach would not rather be an attempt to evade the regulation, which would be prohibited according to the principles of EU law. Moreover, Article 26 of the Regulation only provides for the procedural ordre public, not the substantive ordre public. The latter could apply in connection with the determination and, especially, the effects of the applicable substantive law of national origin as the lex fori concursus; the ordre public exception could in such case at least theoretically be possible from the substantive-law perspective. However, the substantive-law aspects of the situation are already reflected in Article 5 of the Regulation, which provides for the conflict-of-laws exceptions to Article 4 of the Regulation (and, indeed, in substantially all immunity and special provisions of the Regulation, i.e. Articles 5 to 15 of the Regulation). Consequently, it is more than appropriate to examine the purpose of the rule enshrined in Article 26 of the Regulation, i.e. in which situation the recognition and enforcement would have a result that is principally incompatible with the public policy of the respective Member State. No problems arise if the recognition concerns an individual normative act, i.e. an individual court decision rendered in connection with specific insolvency proceedings, for instance, in connection with a creditor’s claim or the bankrupt’s obligation. It is unclear whether the liquidator’s powers in the main insolvency proceedings can be contested and, for instance, their registration be denied in public registers in terms of Article 21 of the Regulation, such as the Land Register, the Companies Register, etc. We may probably agree that the ordre public exception is not applicable in such cases, as it is not applicable for instance in connection with the debtor’s eligibility as a party to the insolvency proceedings (cf. Article 16(2) of the Regulation, or here in the entire context of the Regulation, i.e. especially, though not exclusively, in terms of Articles 3 and 4 of the Regulation, etc.). Similarly, the ordre public exception is also not applicable if, for instance, the rescue plan relating to the bankrupt’s assets (estate) impairs the creditor’s status compared to the option of liquidating, i.e. selling, the estate. Besides, the rescue plan must still rest on the principles that guarantee due procedure, primarily the following principles: (i) each creditor must obtain at least as much as they would obtain if the estate were liquidated, (ii) further operation of the enterprise must be based on a sufficient estate, so that obligations that arise in the future in connection with the due operation of the business will be satisfied, (iii) the absolute priority rule is observed, which requires that the priority satisfaction rights are honored, or that the payment of benefits to lower classes of creditors before satisfaction of the higher classes of creditors is contingent on the latter’s consent, and (iv) the rescue plan for the bankrupt’s enterprise is subject to the court’s consent, and such consent must be withheld if the plan is contrary to laws or good morals, provided that it is approved by the majority of creditors during a separate vote within the individual classes of creditors.
Subnational Public Financial ManagementInstitutions and Macroeconomic Considerations
2005
The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Transparent public financial management at the subnational level requires institutions and processes that mirror those needed at the central government level, in order to generate better accountability and competition among different subnational governments, critical elements in ensuring good governance and efficiency of decentralized administrations. Further subnational debt also has implications for overall macroeconomic stability that concerns the central government. The key components are identified, with a particular focus on subnational debt monitoring and management. JEL Classification Numbers: H7
Financial Stability of Local Government Units – Legal and Economic Approach
Copernican Journal of Finance & Accounting, 2019
The legislator introduced solutions conducive to the financial stability of local government units in the form of Articles 242 and 243 of the Public Finance Act of 2009. They force the reduction of deficit in the so-called current part of the local government budget and limit the amount of funds allocated for the repayment of financial liabilities. The aim of this article is to examine the impact of the obligation to comply with these regulations on the finances of local government units. The article will examine the content of both regulations and statistical data from the Reports on Budget Execution by Local Government Units, provided by the National Council of Regional Chambers of Audit. The summary will present a conclusion that Articles 242 and 243 of the Public Finance Act have a significant impact on the financial management of local governments, obliging them to maintain appropriate proportions between the amounts of income and current expenditure. However, the legal structure of both rules provides for certain exceptions to their absolute observance, which weakens their impact on the finances of local governments.
Until Debt Do Us Part - Subnational Debt, Insolvency, and Markets
2013
State and local debt and the debt of quasi-public agencies have grown in importance as a result of fiscal decentralization, rapid urbanization, and the increasing role played by private capital. However, with debt comes the risk of insolvency. This book brings together the reform experience of major emerging economies and developed countries. Written by leading practitioners and experts in public finance in the context of multilevel government systems, the book examines the interaction of markets, regulators, subnational borrowers, creditors, national governments, taxpayers, ex-ante rules, and ex-post insolvency systems in the quest for subnational fiscal discipline.
Local Government Debt Control Methods by Regional Chambers of Audit
Central European Review of Economics & Finance
The aim of this paper was to evaluate the system of control over local government debt exercised by the Regional Chambers of Audit (RCA) and to present the conclusions and expectations resulting from this assessment both generated by the RCA and applicable to the RCA within the scope of conducted debt audits. The method applied to assess legal regulations included analysis of legislative documents, i.e. primarily the Constitution, the Public Finance Act of 27 August 2009, Act of 7 October 1992 on Regional Chambers of Audit and the Regulation of the Minister of Finance of 28 December 2011 on the detailed manner of classifying debt titles classified as public debt. The analyses contained in this paper cover the period from 2014, when the Individual Debt Ratio defined in art. 243 of the Public Finance Act came into force, until 2018. The presented data and regulations confirm the correct functioning of the extensive control system in this respect. Every year, the number of negative ass...
Management of Commune’s Financial Resources Under Conditions of Debt Bondage
International Journal of Contemporary Management, 2015
Background. A commune local government is formed by inhabitants holding power through their representatives selected to the commune council and to positions of the executive body. Successful local growth is ensured by collaboration among all entities while fulfilling tasks specified by the state law and arising from inhabitants needs. In this paper an entity refers to inhabitants because this choice stems from the conviction that inhabitants co-participate in performing tasks and thus bear the consequences of management which, in the case of finance management, may lead to ill-considered expenditures and excessive indebtedness. Therefore, the research investigates inhabitant’s knowledge about financial economy, specifically the scale of the commune’s debt and related ramifications. Research aim. The aim of the studies conducted is to propose a model for finance management in the commune local government, including management under conditions of debt bondage, where local potentials a...
Insolvent Local Government: German Approaches to Prevention
Uprava, 2011
The global financial crisis is affecting local governments particularly The global financial crisis is affecting local governments particularly The global financial crisis is affecting local governments particularly The global financial crisis is affecting local governments particularly strongly. The threat strongly. The threat strongly. The threat strongly. The threat of insolvency looms large for many local governments, and of insolvency looms large for many local governments, and of insolvency looms large for many local governments, and of insolvency looms large for many local governments, and therefore, it is unfortunately very timely to examine this issue. cannot be, how can it be managed well? I cannot be, how can it be managed well? I cannot be, how can it be managed well? I cannot be, how can it be managed well? In order to do so, the current essay sets n order to do so, the current essay sets n order to do so, the current essay sets n order to do so, the current essay sets out to investigate, on an empirical basis, how Germany has so far (i.e., before out to investigate, on an empirical basis, how Germany has so far (i.e., before out to investigate, on an empirical basis, how Germany has so far (i.e., before out to investigate, on an empirical basis, how Germany has so far (i.e., before the crash) dealt with the issue of municipal insolvency. This pre the crash) dealt with the issue of municipal insolvency. This pre the crash) dealt with the issue of municipal insolvency. This pre the crash) dealt with the issue of municipal insolvency. This pre----crisis approach crisis approach crisis approach crisis approach also underlines the importance of the topic, because also underlines the importance of the topic, because also underlines the importance of the topic, because also underlines the importance of the topic, because it shows that even in more it shows that even in more it shows that even in more it shows that even in more or less financially solid times, municipalities were already exposed to high or less financially solid times, municipalities were already exposed to high or less financially solid times, municipalities were already exposed to high or less financially solid times, municipalities were already exposed to high financial pressure. Now, the crisis has increased the number of municipalities financial pressure. Now, the crisis has increased the number of municipalities financial pressure. Now, the crisis has increased the number of municipalities financial pressure. Now, the crisis has increased the number of municipalities facing a budget crisis. The results of the present investigation can assi facing a budget crisis. The results of the present investigation can assi facing a budget crisis. The results of the present investigation can assi facing a budget crisis. The results of the present investigation can assist in st in st in st in dealing with the consequences of the crisis. On account of its high and indeed dealing with the consequences of the crisis. On account of its high and indeed dealing with the consequences of the crisis. On account of its high and indeed dealing with the consequences of the crisis. On account of its high and indeed paradigm paradigm paradigm paradigm----setting level of municipal autonomy, the possibility of drawing lessons setting level of municipal autonomy, the possibility of drawing lessons setting level of municipal autonomy, the possibility of drawing lessons setting level of municipal autonomy, the possibility of drawing lessons
Law, Democracy and Development, 2003
Senior Lecturer. Law Faculty. University oj the Western Cape 1 INTRODUCTION at least 843 municipalities are facing financial difficulties and many of these are in danger of total collapse. I Eight [ocal authorities In South Africa owe the Department of Land Affairs about R205 million and most of this money is unlikely to be recovered. 2 ... many councils were also defaulting on payments to creditors. These quotes are from but a few of the numerous media reports over the last few years reflecting the sad state of local government finances in South Africa. In February 2000 the Bronkhorstspruit [Own council was reported as being unable (0 meet its financial commitments and as having made "insuf~ ficient provisions for looming bad debts".~ In November 1999 the Johan~ nesburg Metropolitan Council indicated that It would sell its metropolitan centre to an investment company and then rent it back in a desperate attempt to generate urgently needed cash. Despite this cash injection, the council still needed another R 100 million loan and was hoping to 'rollover' an existing R200 million loan that was due at the end of that year. r , In the Government's Policy Framework for Municipal Borrowing and Intervention published in July 2000, the Situation was summarised by the rather bland statement that "fiscal crisis in local government is not new in South Africa".~ I hrrp:llwww.lilfriGu:urll/business/sa/s\[oryOI _tuml i-lu:esscd on 14 Ocrober 1999. 2 As srated by the Auditor-General in his report for [he year ending March 1999, which concluded that therc is i-l "strong possibility" (hi-lt [his Illoney would hi-lve [0 be written off. Sec h(tp:llwww.busincss.ial"rica\_curn/news/sabuslnessnews/14602.htm accessed on