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Limited recourse: Difference between revisions
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====Why?==== | ====Why?==== | ||
The main reason for limiting a [[swap dealer]]’s recourse to the [[espievie]]’s assets is ''not'' to prevent the [[swap dealer]] being paid what it is rightly owed. It is to stop an empty [[SPV]] going into formal [[bankruptcy]] ''once all its assets have been liquidated and distributed [[ | The main reason for limiting a [[swap dealer]]’s recourse to the [[espievie]]’s assets is ''not'' to prevent the [[swap dealer]] being paid what it is rightly owed. It is to stop an empty [[SPV]] going into formal [[bankruptcy]] ''once all its assets have been liquidated and distributed, according to their contractual [[Capital structure|priority]], to investors''. At this point, the [[espievie]] has nothing left to pay anyone, so launching a [[Bankruptcy|bankruptcy petition]] is kinda — ''academic'', but sometimes academic stuff is important if you’re a director of an [[SPV]]. | ||
Now, why would any [[creditor]] want to put an empty [[espievie]] — one which has already handed over all its worldly goods — into liquidation? What good would it do? Search me. Why, on the other hand, would the directors of that empty [[espievie]], bereft as it is of worldly goods, be anxious for it ''not'' to go into liquidation? ''Because their personal livelihoods depend on it'': being directors of a [[bankrupt]] company opens them to allegations of reckless trading, which may bar them from acting as directors to ''other'' countries. Since that’s their day job, that’d be a bummer. | Now, why would any [[creditor]] want to put an empty [[espievie]] — one which has already handed over all its worldly goods — into liquidation? What good would it do? Search me. Why, on the other hand, would the directors of that empty [[espievie]], bereft as it is of worldly goods, be anxious for it ''not'' to go into liquidation? ''Because their personal livelihoods depend on it'': being directors of a [[bankrupt]] company opens them to allegations of reckless trading, which may bar them from acting as directors to ''other'' countries. Since that’s their day job, that’d be a bummer. | ||