UK Corporate Rescue: Recent Developments — Changes to Administrative Receivership, Administration, and Company Voluntary Arrangements — The Insolvency Act 2000, The White Paper 2001, and the Enterprise Act 2002

Abstract

This paper surveys the main effects of recent legislative changes to the corporate insolvency law of the United Kingdom, from the standpoint of their potential impact upon corporate rescue. The reforms, enacted in 2000 and 2002 and brought into force during 2003, have recast the law relating to company voluntary arrangements, administrations, and administrative receiverships. After considering the various deficiencies in the pre-existing law, which rendered each of these procedures in varying ways unsatisfactory for the purpose of addressing the problems of financially troubled companies, the paper examines the process by which the declared intentions of the government when introducing its reforming legislation were significantly altered during the course of enactment into law. While the outcome of this dialectical drama has been the bringing about of some worthwhile improvements in the refashioned administration procedure, this has been accompanied by a significant dilution of the government’s previously stated intentions with respect to the attenuation of the rights and powers of creditors holding security in the form of a floating charge. Consequently, the paper concludes that administrative receivership will retain a far greater practical significance than had been previously envisaged, while the opportunities made available to floating charge holders under the revised administration procedure provide a strong incentive for institutional lenders to continue to make use of this species of security. The author concludes that UK insolvency law has been unable to embrace the “American way” of corporate rescue, with debtor-in-possession as its core principle, but has instead opted for a “rescue” model in which creditor interests continue to assert a dominant influence.