Write A Comparative Paper That Examines Ways For Insolvent B ✓ Solved

Write a comparative paper that examines ways insolvent busin

Write a comparative paper that examines ways insolvent business organizations can deal with their creditors in the United States and Saudi Arabia. Paraphrase the following introduction with the same meaning and thesis: Although businesses hope and expect to succeed when they begin, many times businesses failure in a variety of reasons and the community and legal system must find away to deal with the consequences of business failure, particularly when the business failure result form insolvency. In both the United States and Saudi Arabia legal process have evolved to ensure that the business failures are dealt with in an ordinary manner and that creditors and business owners are protected to some extent from the financial consequences of insolvency. In the United States this legal produces is called a BANKRUPTCY. In the Saudi Arabia Arabic which is the official language in the country is Arabic this legal produces is called “ EFLAAS “ which is meant in English language BANKRUPTCY as well. Both produces have many of the same goals but the differ in many key concept. This paper will give an overview of the similarities and differences. Provide a 1000-word paper with in-text citations and a References section containing at least 10 credible sources.

Paper For Above Instructions

Paraphrased Introduction

Although entrepreneurs generally start businesses with expectations of success, enterprises frequently fail for many reasons, and societies and legal systems must address the fallout—especially when failure stems from insolvency. Both the United States and Saudi Arabia have developed legal frameworks to manage corporate failure so that insolvency is handled predictably while offering some protections to creditors and owners alike. In the United States this framework is embodied in the Bankruptcy Code; in Saudi Arabia the corresponding law—commonly referred to as “Eflāṣ” in Arabic—serves a similar purpose. While the two systems share many objectives, they diverge on key principles and procedures. This paper outlines those similarities and differences and discusses the principal mechanisms through which insolvent firms can engage with creditors in each jurisdiction.

Overview of Creditor-Relief Options: United States

The U.S. insolvency system offers a spectrum of tools for insolvent businesses, centering on Chapters 7, 11, and out-of-court restructurings. Chapter 11 allows a debtor to reorganize while operating as debtor-in-possession, benefiting from the automatic stay that halts creditor enforcement actions and giving time to restructure obligations (11 U.S.C. §§ 362, 1101–1108) (11 U.S.C.). Under Chapter 11, debtors propose reorganization plans subject to creditor voting and court confirmation; cramdown provisions can force dissenting creditor classes to accept a plan under certain fairness standards (11 U.S.C. § 1129(b)) (11 U.S.C.).

Chapter 7 provides for liquidation under the supervision of a trustee who collects and distributes assets to creditors in priority order (11 U.S.C. §§ 701–704) (11 U.S.C.). Additionally, Chapter 15 implements the UNCITRAL Model Law to address cross-border insolvency cooperation, enabling recognition of foreign proceedings and coordination among jurisdictions (11 U.S.C. §§ 1501–1532; UNCITRAL 1997) (UNCITRAL).

Out-of-court workouts and pre-packaged bankruptcies are also vital. They enable consensual restructurings that can be quicker and less costly than formal proceedings, preserving going-concern value (Jackson 1986; Westbrook 2003) (Jackson 1986; Westbrook 2003).

Overview of Creditor-Relief Options: Saudi Arabia

Saudi Arabia’s modern insolvency regime—commonly called the Bankruptcy Law or Eflāṣ Law—was enacted to provide a statutory framework for restructuring and liquidation, emphasizing rescue where feasible and creditor protection (Saudi Bankruptcy Law 2018) (Saudi Bankruptcy Law 2018). The law establishes court-supervised procedures for rehabilitation (restructuring) and liquidation, creates mechanisms for stay of individual enforcement actions, and provides for creditor voting and approval processes. The Saudi framework also recognizes special committees and court-appointed administrators to manage cases under judicial oversight.

Because Saudi commercial law is influenced by civil law principles and Islamic finance norms, certain features—such as treatment of interest-bearing claims and enforcement against collateral subject to Sharia-compliant finance—require specialized handling (IMF 2018) (IMF 2018). The emphasis in practice is often on negotiated settlements and rehabilitation, reflecting policy priorities to preserve employment and economic continuity.

Comparative Analysis: Similarities

Both systems pursue shared goals: maximize creditor recoveries, preserve value where possible, provide orderly priority rules, and balance interests of debtors, creditors, and other stakeholders (World Bank 2019) (World Bank 2019). Each jurisdiction provides court or administrative stays to prevent individual creditor enforcement and establish an orderly claims process. Both permit structured reorganizations and liquidations, involve creditor voting or committees, and encourage restructuring solutions that maintain going-concern value when feasible (UNCITRAL 1997; PwC 2018) (UNCITRAL; PwC 2018).

Comparative Analysis: Key Differences

Procedural infrastructure and doctrine differ significantly. The U.S. operates a specialized federal bankruptcy court system with detailed codified rules, extensive jurisprudence, and established doctrines like automatic stay, debtor-in-possession powers, and statutory discharge procedures (11 U.S.C.). Saudi Arabia’s system is newer and operates within a national legal environment shaped by Sharia principles and civil procedure traditions; its case law and administrative practice are still developing (Saudi Bankruptcy Law 2018; IMF 2018) (Saudi Bankruptcy Law 2018; IMF 2018).

Cross-border coordination is more advanced in the U.S. because of Chapter 15 and decades of cross-border jurisprudence; Saudi Arabia is strengthening its international interfaces but lacks the same depth of precedent (11 U.S.C. § 1501 et seq.; UNCITRAL) (11 U.S.C.; UNCITRAL). Treatment of secured claims, setoff rights, and priority rules may also vary, particularly where Sharia-compliant finance alters the legal characterization of collateral and obligations (KPMG 2018) (KPMG 2018).

Practical Approaches for Insolvent Businesses Dealing with Creditors

In both jurisdictions businesses typically pursue a laddered approach: (1) immediate liquidity triage and negotiation with key creditors; (2) explore consensual out-of-court restructurings (rescheduling, debt-for-equity swaps, forbearance); (3) consider formal restructuring under relevant insolvency statutes to obtain stays and restructuring breathing room; and (4) if rescue is impossible, orderly liquidation under statutory supervision (Jackson 1986; Westbrook 2003; World Bank 2019) (Jackson 1986; Westbrook 2003; World Bank 2019).

Specific tactics differ: in the U.S., use of debtor-in-possession financing (DIP) can provide immediate capital subject to court approval, and cramdown mechanisms can bind dissenting creditors. In Saudi Arabia, court-supervised rehabilitation plans and mediation—combined with sensitivity to Sharia-related issues—are central tools; negotiating with governmental creditors and obtaining regulatory forbearance are often essential in practice (PwC 2018; KPMG 2018) (PwC 2018; KPMG 2018).

Recommendations and Conclusion

For insolvency policy and practitioners, the focus should be on enhancing rescue mechanisms, promoting transparent creditor committees, and expanding out-of-court frameworks to preserve value. Jurisdictions should strengthen cross-border coordination by aligning with UNCITRAL principles and clarifying how Sharia-compliant instruments are treated in insolvency. Businesses facing insolvency should promptly seek professional advice, prioritize core trade creditors to preserve operations, and weigh the costs and benefits of consensual versus formal processes.

While the United States and Saudi Arabia share the objective of balancing creditor recovery with economic continuity, their legal cultures and doctrinal details diverge. Understanding those differences and proactively engaging with creditors under the appropriate national mechanisms increases the chance of a successful restructuring and mitigates losses for all stakeholders.

References

1. 11 U.S.C. §§ 101–1532 (United States Bankruptcy Code).
2. Saudi Bankruptcy Law (Eflāṣ), Kingdom of Saudi Arabia (2018).
3. UNCITRAL, Model Law on Cross-Border Insolvency with Guide to Enactment and Interpretation (1997).
4. World Bank Group, Doing Business: Resolving Insolvency Indicators (2019).
5. Thomas H. Jackson, The Logic and Limits of Bankruptcy Law (Harvard Univ. Press, 1986).
6. Jay Lawrence Westbrook, Principles of Corporate Bankruptcy Law (selected essays), (2003).
7. PwC, "Saudi Arabia: New Insolvency and Restructuring Law — Key Features" (2018).
8. KPMG, "Saudi Arabia: Overview of Bankruptcy and Restructuring Reforms" (2018).
9. International Monetary Fund, "Saudi Arabia: Financial Sector Assessment and Legal Reforms" (2018).
10. UNCITRAL Secretariat, "Comparative Study on Insolvency Systems" and related reports (various years).