The Silver Lining of the UK Insolvency Code / ID: 305348

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ID number:305348

Author: Alina Sokalska (5)

Evaluation:

Published: 08.09.2012.

Language: English

Level: College/University

Literature: 47 units

References: Not used

Time period viewed: 2011.g. - 2011.g.

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Table of contents

Nr.	Chapter	Page.
	List of Abbreviations	5
	Introduction	6
1	Insolvency Law in the UK	8
1.1	The history of the UK bankruptcy Law	8
1.2	Overview of Corporate Insolvency Law in UK	8
1.2.1	Liquidation	8
1.2.2	Administration	9
1.2.3	Receivership	9
1.2.4	Corporate Voluntary Agreement	9
2	Characteristics of an efficient Insolvency law	10
2.1	Characteristics of an efficient insolvency law denoted by scholars	10
2.1.1	The ex-ante efficiency	10
2.1.2	The interim efficiency	11
2.1.3	The ex-post efficiency	13
2.1.4	The Trade-off	14
2.2	Characteristics of an efficient insolvency code denoted by the insolvency practitioners	15
2.2.1	Minimizes costs and reduces duration of the process	15
2.2.2	Empowers the IP with flexibility and wide range of options to choose	15
2.2.3	Enables the IP to take action against irresponsible / criminal managers	16
2.2.4	Facilitates communication and a balanced agreement with major stakeholders without an expensive interference of minorities	16
3	Methodology	17
4	Analysis of the UK insolvency system	19
4.1	Eliminating inefficient companies while rescuing the efficient ones	19
4.1.1	Scholars‟ perspective	19
4.1.2	Insolvency Practitioners` perspective	20
4.1.3	Authors‟ critical evaluation	21
4.2	Allowing flexible problem solving to reach time and cost efficiency	21
4.2.1	Scholars‟ perspective	21
4.2.2	Perspective of insolvency practitioners	23
4.2.3	Authors‟ critical evaluation	25
4.3	Limiting value destroying incentives	27
4.3.1	Scholars‟ point of view	27
4.3.2	Insolvency practitioners` perspective	29
4.3.3	Authors‟ critical evaluation	29
4.4	Summary of the analysis	30
5	Powwow Water Company: The Case Study	31
5.1	Background	31
5.2	Preserving promising enterprises	32
5.3	Analysis of Insolvency Costs	33
	THE SILVER LINING OF THE UK INSOLVENCY CODE	4
5.4	Preventing possible frauds	35
6	Conclusions	38
7	The Bankruptcy Law in Lithuania	38
7.1	Liquidation	39
7.2	Administration	39
7.3	Insolvent firms during the credit crisis in Lithuania	39
7.3.1	Eliminating inefficient companies	39
7.3.2	Time and cost efficiency	40
7.3.3	Limits value-destroying incentives	40
7.4	Main findings	41
	References	43
	Appendix 1	47

Extract

The poor economic situation during the last few years (2008-2010) significantly affected development of the economy of the United Kingdom forcing more firms to default on their debt and leave the market (The Insolvency Service, 2011). The growth in the number of insolvent companies made the efficiency of the UK insolvency system an important object of debates.
However, since the efficiency of the insolvency law is hard measure, there haven‟t been many attempts from the scholars‟ side to evaluate it. Actually, the last thorough analysis of the efficiency of insolvency code in UK was made in 1996 by Julian Franks et al. Because a long time has passed without any updated review the authors chose to fill this blank area. In particular, the authors decided to answer such research question - How efficient is the UK Insolvency code?
As efficiency itself is not definable straightforwardly, authors made a qualitative research looking for benchmarks for evaluation of the efficiency of the law. At first, authors‟ covered the materials explaining the insolvency law in the UK, then turned to studies of scholars expressing their analysis about the efficiency of the law and its enforcement. In order to grasp implications of the latest changes in the law, authors acquainted themselves with opinions of practitioners expressed in magazines specializing in insolvency issues. Finally, in order to get practical valuation of the system, authors distributed a qualitative survey among insolvency practitioners in the UK. More than 350 e-mails were sent to IPs (Insolvency practitioners) asking 6 open-ended questions (Appendix 1). Even though the response rate was low, the authors managed to receive 15 essay-type answers.
In answering the main research question authors analysed the Insolvency code in UK based on three denoted benchmarks of efficient system. In the authors opinion, efficient Insolvency law must: (i) eliminate inefficient companies in the ex-ante and ex-post phases, (ii) allow flexible problem solving to reach time and cost efficiency and (iii) limit value destroying incentives in the ex-ante, interim and ex-post phases.…

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The Silver Lining of the UK Insolvency Code