Asia’s Legal Systems: Are They Strong Enough To Safe Guard Creditors

Reuters  have published an article highlighting the fears that business, creditors & investors have with the strength of Asian legal systems to enforce legal rights…



They write….


Many of the Asia’s legal systems provide weak safeguards to creditors in distress, are extremely slow and suffer from poor enforcement, or fail to provide enough deterrents to stop company directors siding with shareholders rather than creditors.

In times of growth this matters less. But with corporate default rates expected to jump, legal codes are in the spotlight.

"Investors will take a closer look at a country’s legal systems especially because of the trading environment — more will hold to maturity," said Rachana Mehta, head of fixed income at KE Capital Partners.

She said the absence of trading liquidity in secondary markets would mean more investors would have a hold and buy strategy and thus would need to know legal enforceability of their claims in the event of a default.

Companies in countries where creditors have weaker rights — or where the rights they have are enforced poorly or at a glacial pace — may find it even harder to attract buyers for their debt.


The article goes on to highlight the most reliable legal systems in the region .. Hong Kong & Singapore but says that China, the Philippines and Indonesia  are languishing


Read the full article at