Insolvency, Bankruptcy : A WAY BEYOND?
Main Page : INTRODUCTION
Extract 1 : THE RESCUE CULTURE
Extract 2 : THE ENGLISH RESCUE CULTURE
Extract 3 : RESCUE CULTURE - CAN WE LEARN FROM OTHER JURISDICTIONS?
Extract 4 : A WAY BEYOND?
A WAY BEYOND?
In a short answer yes. As can be seen from the preceding discussion, there have made large steps but there still remains paces ahead.
It is submitted that the US system can be seen to offer something of a greater flexibility over the UK approach, and should be followed to some extent. There are two provisions that may prove useful in UK, one is to alter the position to one that is like in the US where the company can be kept in the hands of the current managers yet under close supervision of the court, and the other is a change to ensure that as in as there is no need to always liquidate the company even if it is worth more to the creditors as liquidated then to be kept running as a going concern.
As regards to the much needed moratorium the restrictions on companies are still, it is submitted, overtly restrictive. A company is not eligible if it is in liquidation (including provisional liquidation), receivership or administration or if a voluntary arrangement is already in place. Nor is it eligible if at any time during the period of 12 months ending with the date of filing and either a voluntary arrangement was put in place at the time or any voluntary arrangement put in place during the moratorium came to an end prematurely.
Effectively, as Rennie points out "the directors get one shot at the title."1 Indeed the very purpose is that the moratorium gives them time and leeway to put the CVA into action and, if they cannot do this during the period of the moratorium, they are unlikely to get another chance. In addtion, the provisions only apply for what are, on the grand scheme of things, very small companies, and there seems to be no good reason why if the provision apply to smaller companies that they shouldn't apply to larger companies.
The provisions have made significant steps forward with the deferring of the Crown's preferential rights to recover unpaid taxes ahead of other creditors, which will undoubtedly lead to companies being given a further lifeline. In addtion, the veto power of floating charge holders has been retracted, and under the 2002 Act a proportion of the funds which would otherwise be available to the floating charge holders are to be allocated for distribution to unsecured creditors through "ring-fencing" in a way that further resembles the viewpoint of the left of rescue culture philosophy, aimed at a purposive rights shifting again been followed. 2
And, it is submitted long may such continue.
- See http://www.legal500.com/devs/scotland/in/scin_002.htm[^ Return]
- http://www.mazars.co.uk/resources/publications/cris_news/crisnews_11_02.pdf[^ Return]
Baird, D.G., (1986) "The Uneasy Case for Corporate Reorganisations" 15 Journal of Legal Studies
Baird, D.G., (1987) "Loss Distribution, forum Shopping and Bankruptcy: a Replay to Warren 54 University of Chicago Law Review
Carruthers, B.G., and T.C. Halliday (1998) " Rescuing Bussiness: The Making of Corporate Bankruptcy Law In England and United States, clarendon Press, Oxford
Dal pont, G and Griggs L., (1996) " A Principled Justification of Business Rescue Laws: A Comparative Prespective, Part II 5 International Insolvency Review
Finch, V (2002) Corporate Insolvency Law - Perspectives and Principles (1st ed) Cambridge Press
Flessner,A. (1994) "Philosophies of Business Bankruptcy Law" in Ziegel, J.S., (ed) "Current Developments in International and Comparative Corporate Insolvency Law", Clarendon Press, Oxford
Fletcher, I. F., (1989) " Genesis of Modern Insolvency Law: An odyssey of Law Reform" JBL
Franks, J and Torrous W. (1996) " lesson from A Comparison of Us and UK Insolvency Codes" in Bhandari, J.S., and Weiss L.A., (eds) "Corporate Bankruptcy: Economic and Legal Perspectives" , Cambridge University Press, Cambridge
Hewitt, P "Productivity and Enterprise: Insolvency: A Second Chance", Department for Trade and Industry, The Insolvency Service, Cm 5234, London, July 2001
Hunter, M., (1999) " The Nature and Functions of a Rescue Culture" JBL 491
Jackson T.H., (1986) " the Logic and Limits of Bankruptcy Law, Harvard University Press, Cambridge
Jackson, T.H., and Scott, R. (1989) " On the Nature of Bankruptcy: An Essay on Bankruptcy sharing and the Creditor's Bargain" 75 Virginia law Review
Jackson, T.H., and Baird, D.G., (1984) " Corporate Reorganisations and the Treatment of Diverse Ownership Interests: A Comment on Adequate Protection of Secured Creditors in Bankruptcy" 51 Univerisity of Chicago Law Review
Korobkin, D. R., (1993) "Contractarianism in and the Normative Foundations of Bankruptcy Law" 71 Texas Law Review
Korobkin, D.R., (1991) "Rehabilitating Values: A Jurispudence of Bankruptcy" 91 Colum Law Rreview
Hill, (1990) "Company Voluntary Arragements" 6 Inslivnecy law and Practice
Moss, G., (1997) "Comparative Bankruptcy Cultures: Rescue or Liquidations? Comparisons in National Law- England" 23 Brooklyn Journal of International Law
Segal, N., (1994) "An Overview of Recent Developments and Future Prospectives in the UK" in Ziegel, J. (ed) "Current Developments in International and Comparative Corporate insolvency Law", Clarendon Press, Oxford
Rajak, H., (1993) "Company Rescue" 4 Inslovency Law and Practice
Rasmussen. R (1994) "An Essay on Optimal Bankruptcy Rules and Social Justice" U Illinois Law Review 1
This essay has been written by a student and kindly submitted in order to help you with your studies.
If you would like your own custom written law essay then you can find out more here...
Was this useful to you?
Did you find this article useful? Was the content up-to-date or do you have something to add? Give us your feedback and we'll make this site even better for you to use!