Corporate Insolvency Law: Perspectives and Principles

Cover......Page 1
Half-title......Page 3
Title......Page 5
Copyright......Page 6
Dedication......Page 7
Contents......Page 9
Acknowledgements......Page 13
Table of cases......Page 14
Table of statutes and other instruments......Page 32
Abbreviations......Page 50
Introduction to the second edition......Page 53
Part I Agendas and objectives......Page 59
1 The roots of corporate insolvency law......Page 61
Development and structure......Page 62
Corporate insolvency procedures......Page 71
Administrative receivership......Page 72
Administration......Page 73
Winding up/liquidation......Page 74
Formal arrangements with creditors......Page 75
Administrative receivers......Page 77
Company voluntary arrangement (CVA) supervisors......Page 78
The tasks of corporate insolvency law......Page 79
Conclusions......Page 80
Cork on principles......Page 81
Creditor wealth maximisation and the creditors’ bargain......Page 84
A broad-based contractarian approach......Page 90
The communitarian vision......Page 92
The forum vision......Page 95
The ethical vision......Page 96
The multiple values/eclectic approach......Page 97
The nature of measuring......Page 100
An ‘explicit values’ approach to insolvency law......Page 104
Conclusions......Page 115
Part II The context of corporate insolvency law: financial and institutional......Page 119
3 Insolvency and corporate borrowing......Page 121
Creditors, borrowing and debtors......Page 122
Security......Page 126
Quasi-security......Page 129
Third-party guarantees......Page 131
Debtors and patterns of borrowing......Page 132
Equity and security......Page 136
Equity shares......Page 137
Secured loan financing......Page 139
Fixed charge financing......Page 143
Floating charges......Page 144
Why security? The economic efficiency case......Page 145
The efficiency case against security......Page 151
Improving on security and full priority......Page 158
Unsecured loan financing......Page 172
Ownership-based (quasi-security) financing......Page 177
The ‘new capitalism’ and the credit crisis......Page 185
Conclusions......Page 192
4 Corporate failure......Page 196
What is failure?......Page 197
Who defines insolvency?......Page 201
Why companies fail......Page 203
Poor financial controls......Page 204
Mismanagement......Page 206
External factors......Page 213
Late payment of debts......Page 217
Conclusions: failures and corporate insolvency law......Page 223
5 Insolvency practitioners and turnaround professionals......Page 230
Insolvency practitioners......Page 231
The evolution of the administrative structure......Page 234
Efficiency......Page 238
Expertise......Page 243
Fairness......Page 244
Accountability......Page 251
Insolvency as a discrete profession......Page 254
An independent regulatory agency......Page 255
Departmental regulation......Page 261
Fine-tuning profession-led regulation......Page 262
Conclusions on insolvency practitioners......Page 272
Turnaround professionals......Page 273
The efficiency and accountability of the turnaround professional system......Page 274
Turnaround professionals and fairness......Page 279
Expertise......Page 283
Conclusions......Page 289
Part III The quest for turnaround......Page 293
What is rescue?......Page 295
Why rescue?......Page 297
Informal and formal routes to rescue......Page 303
The new focus on rescue......Page 305
The philosophical change......Page 306
Recasting the actors......Page 325
Comparing approaches to rescue......Page 328
Conclusions......Page 344
7 Informal rescue......Page 346
Who rescues?......Page 347
Assessing the prospects......Page 351
The alarm stage......Page 356
The evaluation stage......Page 357
Agreeing recovery plans......Page 358
Managerial and organisational reforms......Page 369
Asset reductions......Page 370
Debt restructuring......Page 371
Debt/equity conversions......Page 373
Conclusions......Page 376
8 Receivers and their role......Page 379
The development of receivership......Page 380
Processes, powers and duties: the Insolvency Act 1986 onwards......Page 383
Efficiency and creditor considerations......Page 392
Expertise......Page 405
Accountability and fairness......Page 406
Revising receivership......Page 410
Conclusions......Page 413
The rise of administration......Page 415
From the Insolvency Act 1986 to the Enterprise Act 2002......Page 417
The Enterprise Act reforms and the new administration......Page 432
Financial collateral arrangements......Page 437
Preferential creditors, the prescribed part and the banks......Page 439
Exiting from administration......Page 442
Use, cost-effectiveness and returns to creditors......Page 444
Responsiveness......Page 449
Super-priority funding......Page 456
Rethinking charges on book debts......Page 462
Administrators’ expenses and rescue......Page 467
The case for cram-down and supervised restructuring......Page 470
Equity conversions......Page 474
Expertise......Page 478
Fairness and accountability......Page 491
Conclusions......Page 503
10 Pre-packaged administrations......Page 505
The rise of the pre-pack......Page 506
Efficiency......Page 508
Fairness and expertise......Page 511
Accountability and transparency......Page 515
The ‘managerial’ solution: a matter of expertise......Page 517
The professional ethics solution: expertise and fairness combined......Page 518
The regulatory answer......Page 519
Evaluating control strategies......Page 522
Conclusions......Page 529
Schemes of arrangement under the Companies Act 2006 sections 895–901......Page 531
Company Voluntary Arrangements......Page 540
The small companies’ moratorium......Page 543
The CVA as an efficient rescue mechanism......Page 547
Crown creditors and CVAs......Page 551
The nominee’s scrutiny role......Page 553
Rescue funding......Page 554
Landlords, lessors of tools and utilities suppliers......Page 555
Expertise......Page 556
Accountability and fairness......Page 558
Unfair prejudice......Page 561
The shareholders’ power to approve the CVA......Page 564
Conclusions......Page 566
12 Rethinking rescue......Page 569
Part IV Gathering and distributing the assets......Page 579
The voluntary liquidation process......Page 581
Compulsory liquidation......Page 588
Public interest liquidation......Page 593
The concept of liquidation......Page 600
Efficiency......Page 601
Expertise......Page 619
Accountability......Page 620
Avoidance of transactions......Page 622
Preferences......Page 623
Transactions at undervalue and transactions defrauding creditors......Page 627
Avoidance of floating charges......Page 632
Fairness to group creditors......Page 633
Conclusions......Page 648
14 The pari passu principle......Page 651
Liquidation expenses and post-liquidation creditors......Page 654
Preferential debts......Page 656
Set-off......Page 666
Subordination......Page 673
Deferred claims......Page 676
Conclusions: rethinking exceptions to pari passu......Page 677
15 Bypassing pari passu......Page 680
Security......Page 683
Retention of title and quasi-security......Page 693
Trusts......Page 700
The recognition of trusts......Page 701
Advances for particular purposes......Page 703
Consumer prepayments......Page 706
Efficiency......Page 709
Fairness......Page 715
Alternatives to pari passu......Page 718
Debts ranked ethically......Page 722
Debts ranked on size......Page 723
Debts paid on policy grounds......Page 724
Conclusions......Page 725
Part V The impact of corporate insolvency......Page 727
Accountability......Page 729
Common law duties......Page 733
The beneficiaries of the duty......Page 737
When does the duty arise?......Page 740
General duties......Page 746
Fraudulent trading......Page 748
Wrongful trading......Page 750
‘Phoenix’ provisions......Page 755
Enforcement......Page 756
Public interest liquidation......Page 762
Expertise......Page 768
Efficiency......Page 792
Fairness......Page 802
Conclusions......Page 805
17 Employees in distress......Page 806
Protections under the law......Page 808
Efficiency......Page 819
Accountability......Page 824
Fairness......Page 827
Conclusions......Page 830
18 Conclusion......Page 832
Bibliography......Page 840
Index......Page 889