Vol 22 (2025) - Issue 2

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The Latin American Principles for Out-of-Court Workouts

Synopsis
Out-of-court workouts can save significant costs associated with the initiation of a formal insolvency proceed
ing. Therefore, they can help minimise the loss of value experienced by an insolvent firm, ultimately contribut
ing to the maximisation of the returns to creditors and the reorganisation of viable but financially distressed
businesses. Additionally, an out-of-court agreement can provide a level of flexibility and confidentiality that
is usually lacking in formal insolvency proceedings.
Thus, an out-of-court workout can serve as a valuable mechanism to deal with a situation of financial distress,
especially in the context of countries with inefficient insolvency systems and companies with concentrated debt
structures. Yet, workouts need to be promoted. First of all, countries should identify and get rid of any legal and
regulatory obstacles that may prevent an out-of-court restructuring. Secondly, all the relevant actors involved
in a situation of financial distress need to be aware of the value and limitations of workouts and how to imple
ment them successfully. To facilitate this latter goal, the Ibero-American Institute for Law and Finance decided
to embark on a project that led to the publication of the 'Latin American Principles for Out-of-Court Workouts'.