At the time of writing these remarks, it remains to be seen which of two seismic events will ultimately prove more damaging and embarrassing to the citizens concerned: the vote in favour of BREXIT, or the England football team’s loss to Iceland. It is also hard to establish which of the two came as more of a surprise to those supposedly in the know.
Too soon, of course, to discern through the clouds of ash and cascading lava flows of the volcanic BREXIT vote what lasting changes there will be to the economic and political landscapes of the UK, Europe and beyond. So, instead, here are what we hope will be one or two interesting diversions to calm you. The content in this newsletter touches on Cayman and India, as well as China. Please enjoy.
Cayman Inspectorship – a rarely used option, but worth considering
In October 2015, the Grand Court of the Cayman Islands appointed Patrick Cowley, Galaxy Chan and Alex Lawson, partners from KPMG’s China and Cayman firms, as Joint Inspectors over Greens Holdings Limited (HKEx: 1318), to report on the affairs of the company and, after focusing on a number of specific issues identified by the Court, to express their opinion as to whether the Company is or is likely to become insolvent. This is understood to be only the third time that this particular tool has been employed by the Cayman Court.
Click here for the case study article, which talks about the process, benefits and limitations of inspectorship.
China Outlook 2016
KPMG’s new report - China Outlook 2016 finds that China’s inward and outward investment patterns are reflective of the country’s economic restructuring, and are likely to continue being so in 2016 and beyond, with opportunities increasingly found in those sectors and areas whose development will contribute towards China’s transition into a high value-added economy.
Click here for the article
India Insolvency and Bankruptcy Code
The current Indian bankruptcy regime is a highly fragmented system that was borne out of multiple judicial forums, resulting in a lack of clarity and certainty in jurisdiction.
The Insolvency and Bankruptcy Code, 2016 (the Code) aims to change this scenario. The Code provides for a specialised forum to oversee insolvency and liquidation proceedings for individuals, small and medium enterprises (SMEs) and corporates.
The Bill was approved in the Lok Sabha on 5 May 2016 and Rajya Sabha on 11 May 2016. However, much more needs to be done in terms of building a conducive infrastructure and ecosystem proposed under the Code.
KPMG in India has put together a Point of View (PoV) on this Bill. The PoV covers:
- A detailed overview of the Code and its proposed features
- Challenges in the present ecosystem: the fragmented Indian bankruptcy regime, the pro-revival approach of the judicial systems, which leads to delays in the closure of unviable businesses, lack of adequate and credible data regarding the assets, indebtedness and security situations of companies, amongst others
- The groundwork that needs to be done to ensure the effectiveness of the Code. This involves building an insolvency ecosystem, including appointment of members of the Board and judges for the Adjudication Authority, grandfathering of insolvency professionals to create capacities in the interim period, etc.
For the full report, please click here.
Overall, this legislation is a big step towards the ease of doing business in India and has the potential to bring business practices in India closer to the more developed markets.
KPMG Restructuring in the news
The China Restructuring team has further expanded
The China restructuring practice continues to expand with KPMG Huazhen LLP being selected by the Zhejiang High People’s Court as one of only 17 approved bankruptcy firms (浙江省高级人民法院第一批17家符合报名条件省外破产案件管理人社会中介机构).
Further news to announce for our Restructuring practice in Beijing. Rosalie Lui, principal, has been appointed Head of the Beijing Restructuring team. Rosalie has 19 years of restructuring experience, who joined KPMG Restructuring Services team in 1997. Rosalie is one of the liquidators of three Lehman Brothers entities in Hong Kong, also liquidator of MF Global’s Hong Kong broker-dealer operations. There are now 10 professionals within the Beijing team. Rosalie has led the team in working on both domestic and cross border restructuring cases in Beijing.
China NPL updates and securitisation
The NPL ratio of Chinese commercial banks started to rise in 2013 and reached 1% by the end of 2013. NPLs reached 1.25% in 2014 Q4 and to 1.67% in 2015 Q4. The NPLs continue to show an upward trend with the latest official NPLs ratio announced by China Banking Regulatory Commission for 2016 Q1 being 1.75%.
We continue to assist a number of Chinese banks to dispose of their NPL portfolios. Since the beginning of 2014, we have disposed of 245 NPL portfolios representing approximately CNY150 billion. Apart from the sell side, a number of funds and potential investors have approached us on the China NPLs buy side opportunities and possible servicing platform.
Another hot topic in the China NPLs area is securitisation. In February 2016, the Chinese government issued a notice supporting the financial institutions to strengthen and improve the effectiveness of managing non-performing loans. One of the methods is through securitisation. Six large Chinese banks were selected for a trial run of securitising the NPLs and we are currently advising 2 of them by assisting them on due diligence, tax and accounting advisory. Three further banks were picked in May 2016 as the second batch of trial run.
Restructuring India team in Hong Kong, 25th & 26th July
Our India restructuring partner, Varun Gupta, and director, Shailen Shah, will be in Hong Kong conducting a client roadshow on 25th and 26th July. Should you have active interest in the distress assets space in India and would like to have a meeting with them, please send an email to Mandy Chung.