The measures of insolvency law

Abstract

Insolvency is an area of law of increasing importance not merely in its own right but because it impinges on a host of other sectors such as the employment, tort, environmental, pension and banking law fields. It is essential, therefore, that the development of insolvency law proceeds with a sense of purpose. If lacking a sense of direction, this area of law is liable to be marked by inconsistencies of reasoning and failures of policy and related legal sectors will also be affected. Is it possible to outline the purposes of insolvency law and set down criteria and objectives by which insolvency law can be judged? Is this a field in which aims and objectives crowd so densely as to obscure the light? The present article seeks out the justifications for insolvency law and processes. This exploration, it is hoped, will enhance the clarity with which insolvency issues can be addressed and will explain the roles of a variety of posited rationales for insolvency law. For present purposes attention will be confined to the corporate insolvency area and personal bankruptcy issues left to future consideration. To define in precise terms the province of corporate insolvency law might be to beg questions concerning the proper aims, objectives and scope of such law but, as a preliminary matter, this area of law is taken to have as its central concerns the following: the winding up of insolvent companies; receivership; voluntary arrangements; administration orders; and provisions dealing with malpractice attending corporate failure. A starting point in looking to the objectives of modern English corporate insolvency law is the statement of aims contained in the Cork Committee Report of 1982.1 Section 1 looks at the contribution of this statement, and also assesses the limitations of such a formulation. Section 2 reviews a number of competing visions of the insolvency process that are to be found in the legal literature and Section 3 offers an approach that allows and explains trade-offs between competing and legitimate objectives for corporate insolvency processes.