Insolvency Practitioners Research Articles

Verdicts on the optimization of corporate insolvency legal frameworks for sustainable development in Tanzania and Mauritius

Purpose Sustainable development necessitates balancing economic growth, social inclusion and environmental protection to meet present needs without compromising future generations. The 17 United Nations Sustainable Development Goals (SDGs) provide a global framework to address these challenges. This study aims to explore how optimizing corporate insolvency legal frameworks in Tanzania and Mauritius can contribute to sustainable development, focusing specifically on the intersection of insolvency law and sustainability. Design/methodology/approach The study adopts a qualitative research methodology, integrating Creditors’ Bargain Theory and Communitarian Theory to analyze insolvency frameworks. The Creditors’ Bargain Theory emphasizes the importance of creditors’ rights in insolvency proceedings, whereas Communitarian Theory highlights broader societal impacts. The research is based on an extensive literature review of 59 academic sources, legal texts and reports, complemented by primary data collected through surveys involving at least 20 legal experts, insolvency practitioners, academics and researchers from both jurisdictions. Data was analysed to identify key themes, strengths, weaknesses and best practices within the existing legal frameworks of Tanzania and Mauritius. Findings The study identifies significant disparities between the insolvency frameworks in Tanzania and Mauritius. Tanzania’s framework is encumbered by outdated laws and high burdens of proof for insolvency claims, while Mauritius has a more streamlined process but contends with the misuse of statutory demands. Both countries require reforms to address preferential claims and improve regulatory oversight of insolvency practitioners. The study highlights the need to prioritize consumer claims, set minimum thresholds for statutory demands and ensure equitable treatment of creditors. It further emphasizes enhancing regulatory frameworks, particularly in Tanzania, where insolvency practitioners operate without comprehensive guidelines, in contrast to Mauritius’s more robust system. Originality/value This study offers a unique comparative analysis of how insolvency frameworks in Tanzania and Mauritius can be reformed to align with sustainable development objectives. It provides valuable insights into how legal reforms, including the introduction of penalties and enhancement of practitioner qualifications, can contribute to more sustainable economic practices.

Problematic aspects of covering costs related to insolvency proceedings

The article is dedicated to examining the problematic aspects that arise in practice concerning the formation, execution, and reimbursement of costs associated with insolvency proceedings for small and medium­sized enterprises and developing proposals to address these issues. Special attention is given to the analysis of the current insolvency legislation in Ukraine, identifying its shortcomings in regulating the composition of expenses in bankruptcy cases, the mechanisms for covering these costs, and the determination oftheirfunding sources. The authors argue that the feasibility of applying bankruptcy procedures, an objective assessment of their effectiveness, and the independence of insolvency practitioners largely depend on the provision of adequate financing for the costs associated with insolvency proceedings. The article highlights the specifics of applying bankruptcy procedures in situations where the debtor lacks sufficient assets to cover the expenses associated with the proceedings. The author proposes the introduction of a new simplified liquidation procedure that provides for minimal implementation timelines and reduced costs. Such a procedure has the potential to significantly alleviate the financial burden on debtors and simplify the process for insolvency practitioners. The relevance and necessity of urgently improving the regulatory framework governing the costs associated with insolvency proceedings are substantiated, along with the comprehensive provision of debtors with effective legal instruments to resolve their obligations in a state of insolvency. Based on the conducted research, practical recommendations have been developed for amending the insolvency legislation. These proposalsinclude standardizing thelistof expenses, improving the mechanisms for advancing costs, introducing more efficient methods for covering expenses and ensuring the timely payment of costs associated with insolvency proceedings. Thus, the article aims to contribute to the further improvement of Ukraine’s insolvency legislation, enhancing its effectiveness and ensuring greater legal certainty for all participants in the bankruptcy process.

A Comparative Analysis of Litigation Funding in Insolvency Claims and in Class Actions

There is an extensive literature on third party litigation funding (‘TPLF’) of class actions and a separate literature on the longer- standing use of TPLF in claims by insolvency administrators such as liquidators and bankruptcy trustees. Despite this, there has been little comparative study of TPLF in the two species of litigation. This article seeks to fill that gap and, in so doing, draw some distinctions impacting the issue of appropriate regulation in the two contexts. These include salient differences between repeat playing Australian Securities and Investments Commission-regulated professional insolvency practitioners governed under corporate and personal insolvency regulatory architecture and less experienced, less regulated representative plaintiffs in class actions. Further, the existence of vulnerable class members as silent ‘parties’ to class action litigation and funding arrangements and the effect of settlement processes affecting non-responsive class members is noted. These are found to raise differences, despite both types of litigation benefitting from substantial court supervision.

Retail company voluntary arrangements: A dubious remedy?

AbstractDespite much debate on Company Voluntary Arrangements (CVA) among UK retailers, understanding of retail CVAs remains limited. There is continuing uncertainty about the uptake of CVAs, what aspects lead to successful outcomes and whether CVAs can be viewed as a remedy for struggling UK retailers. To address these questions, we developed and analysed a novel and detailed dataset of Companies House records for the population of retailers' CVAs between mid‐2012 and early 2021. We find that CVAs, despite detrimental impacts on other actors (landlords and suppliers), can be a useful tool for some retailers in adjusting to the new market conditions. The uptake of CVAs among retailers is stable, though not among large retailers. Retail CVAs help to avoid immediate business failure, but we found limited evidence of the success and efficient longer term outcome of the procedure, suggesting that alternative methods could be considered. The success and efficiency of CVA do not seem to depend on the size of the business, but there are variations in both the uptake and efficiency of CVAs across retail sub‐sectors. This suggests that a range of mechanisms are required to cater to the different needs across retail categories. Despite the market challenges, CVAs are not prolonged on average. However, longer duration CVAs seem to have a lower chance of succeeding and of being efficient implying that CVA cannot remedy fundamental business issues. Finally, we observed differences related to who oversees the procedure, suggesting that greater emphasis should be put on upskilling and selection of insolvency practitioners.

The Problem of the Implementation of Jurisdiction by Courts with Regards to Claims Against Personal Bankrupts for Debt Arising prior to the Appointment of an Insolvency Practitioner

The Problem of the Implementation of Jurisdiction by Courts with Regards to Claims Against Personal Bankrupts for Debt Arising prior to the Appointment of an Insolvency Practitioner

A critical assessment of administration as a rescue mechanism of an insolvent corporate debtor in Uganda

Insolvency law enhances growth and alleviates financial challenges of businesses, but it can also be inefficient and delay commercial justice. This article critically evaluated Uganda's insolvent corporate debtor administration method and impacts. At the end, the article call for the bankruptcy protective order duration to be extended to at least a month in order to allow a debtor to establish payment arrangements. This period may be sufficient for the bankrupt to decide on the next steps to take to clear their debts, compared to the 14 days allowed under present insolvency law. Without increasing this term, the temporary protection order will fail since the bankrupt will still be panicked and may sell his/her business property at a loss. It is also recommended by the study for legal training to be organized for insolvency practitioners. This will ensure that only trained insolvency practitioners can practice. Finally, there is urgent need for enhanced insolvency law. Keywords: Insolvency, Administration, Corporate debtor, Creditor, Insolvency practitioners

Article Oh Captain(s)! My Captain(s)

In this article, the author examines to what extent the European Insolvency Regulation (recast) authorizes Member States' courts to cooperate cross-border through appointing the same insolvency practitioner in insolvency proceedings relating to group companies (a so-called 'group insolvency practitioner'). The author concludes that, within certain boundaries which the article examines thoroughly, courts already can and should make such appointments. The article concludes with various recommendations in order to improve the useful application of this valuable cross-border insolvency tool. 

Prerequisites for the Recovery of Companies in Economic Difficulty by Concluding Agreements with Relevant Creditors

Insolvency prevention procedures have recently been reformed, in the context of aligning national legislation with the European requirements. To ensure an effective chance of recovery of viable debtors, more accessible and coherent out-of-court frameworks have been created. The restructuring agreement procedure gives distressed debtors the chance to restructure their debts, by means of an agreement with the relevant creditors in order to avoid insolvency. The initiative to make the agreement rests exclusively with the debtor, the law expanding the scope of those entitled to apply for this remedy. The attestation of the state of difficulty is made on objective grounds and not on simple presumptions, as a result of an assessment carried out by an insolvency practitioner and concretized in a report. The restructuring agreement is drawn up with the support of the restructuring administrator, who will ensure that its structure contains the mandatory elements stated by law. The approval of the agreement, negotiated in advance, is subject to the vote of the creditors whose claims are affected, according to the category to which they belong. The confirmation of the restructuring agreement by the syndic judge is carried out in a non-contentious procedure, with a legality control being carried out.

Group concerns and communication and cooperation between practitioners under the European Insolvency Regulation (Part II)

AbstractIn this article, the author examines with a specific focus on the insolvency practitioner to what extent the Recast European Insolvency Regulation's provisions on communication, cooperation and coordination between the main actors in group companies' insolvency proceedings allow for efficient restructurings of those group companies. In doing so, the author will, at points, compare the provisions in Chapter V of the Recast European Insolvency Regulation to—and draw inspiration from—the German provisions on groups of companies that were adopted into the German Insolvency Act (Insolvenzordnung) and the United Nations Commission on International Trade Law's Model Law on Enterprise Group Insolvency. The author also aims to outline, among other things, the various forms of (cross‐border) communication, cooperation and coordination that the Recast European Insolvency Regulation obligates insolvency practitioners of groups of companies to engage in, how they should implement those forms of ‘CoCo’ and what would happen if they neglect to comply with those obligations. This article is Part II of a diptych on this topic; Part I was published in an earlier issue of this journal.

Licensing Insolvency Practitioners in Zambia: Aligning with International Best Practices

A well-regulated insolvency regime is crucial for fostering economic activity. This article examines a recent development in Zambia’s insolvency framework – the introduction of licensing requirements for insolvency practitioners by the Patents and Companies Registration Agency (PACRA) under the Corporate Insolvency Act No. 9 of 2017. We analyse how this aligns with international best practices in insolvency regulation, where jurisdictions like the UK, South Africa, and Kenya have similar licensing regimes to ensure practitioners competence and ethical conduct.The article further explores the potential for strengthening the Zambian system by considering the experience requirement for accreditation observed in other countries. We discuss the potential benefits of such a requirement, such as improved service quality and a more specialized pool of insolvency professionals. By examining Zambia’s recent licensing initiative and exploring the possibility of an experience requirement, this article contributes to the ongoing discussion on how to create effective and efficient insolvency regimes.

Are Insolvency Practitioners Human? On the Role of Similarity, Outcome and Gender Bias in Insolvency Situations

Are Insolvency Practitioners Human? On the Role of Similarity, Outcome and Gender Bias in Insolvency Situations

Group concerns and communication and cooperation between practitioners under the European Insolvency Regulation (Part I)

AbstractIn this article, the author examines with a specific focus on the Insolvency Practitioner to what extent the Recast European Insolvency Regulation's provisions on communication, cooperation and coordination between the main actors in group companies' insolvency proceedings allow for efficient restructurings of those group companies. In doing so, the author will, at points, compare the provisions in Chapter V of the Recast European Insolvency Regulation to—and draw inspiration from—the German provisions on groups of companies that were adopted into the German Insolvency Act (Insolvenzordnung) and the United Nations Commission on International Trade Law's Model Law on Enterprise Group Insolvency. The author also aims to outline, among other things, the various forms of (cross‐border) communication, cooperation and coordination that the Recast European Insolvency Regulation obligates insolvency practitioners of groups of companies to engage in, how they should implement those forms of ‘CoCo’ and what would happen if they fail to comply with those obligations. This article is Part I of a diptych on this topic, Part II of which will be published in a subsequent issue of this journal.

Public or private gatekeepers in non‐consensual debt restructurings in emerging jurisdictions

AbstractIn advanced jurisdictions, the choice of a non‐consensual debt restructuring is between a public or a private gatekeeper model where either the court or the licensed insolvency professional respectively approves a restructuring plan that binds dissenting creditors. In the United States, the only gateway is found in Chapter 11 of the Bankruptcy Code 1978, which requires court approval and gives the debtor a significant say in the outcome. In contrast, in the United Kingdom, there exist four gateways, only two of which require court approval (scheme of arrangement and restructuring plan), while the remaining two (administration and company voluntary arrangement) give significant powers to the insolvency practitioner to decide on the outcome. In emerging jurisdictions such as Mainland China and India, due to path dependency and lack of institutional capacity, the court‐supervised model is chosen as the only or primary gateway to legitimise non‐consensual restructurings though the insolvency practitioner has an important statutory role. Using the two jurisdictions as case studies, this article argues that such a choice has several initial benefits but also leads to several problems, including delays in the restructuring, does not necessarily improve substantive outcomes and does not adequately address the shareholder–creditor and creditor–creditor agency costs. This article proposes that for debt restructuring that involves the sale of the business as a going concern, the private gatekeeper should be able to decide on the sale and the distributions following pre‐bankruptcy entitlements. Recourse to the court as a public gatekeeper should only be used for reorganisation proceedings.

Arbitration in Insolvency

The present article highlights the relationship between arbitration and insolvency proceedings. It examines from a comparative law perspective the questions of whether the arbitration agreement remains effective when the insolvency proceedings are opened, whether it binds the insolvency administrator, whether the latter can disengage from it under the rules on executory contracts, and which insolvency-related disputes are covered by it. In particular, it is discussed whether avoidance actions are arbitrable and whether the insolvency practitioner can conclude an arbitration agreement with the opposing party.

Exceptions to the binding force of a debtor’s arbitration agreement on the Insolvency Practitioner

Exceptions to the binding force of a debtor’s arbitration agreement on the Insolvency Practitioner

ОЦЕНКА СОСТОЯНИЯ БИЗНЕСА В РАМКАХ АНТИКРИЗИСНОГО УПРАВЛЕНИЯ: ПОДХОДЫ ДЛЯ СОБСТВЕННИКА, КРЕДИТОРА, АРБИТРАЖНОГО УПРАВЛЯЮЩЕГО И ИНВЕСТОРА

The article suggests approaches to business evaluation by various stakeholders for crisis management purposes. For owners and managers, an identification system of business sustainability decline has been developed, including market, operational, investment, financial, managerial and organizational indicators. For creditors, a strategic map is proposed, containing market, process, resource and financial triggers identified during express diagnostics and advanced trigger analysis. For insolvency practitioners, the methodology of financial analysis has been modified, supplemented by an algorithm for debtor’s transactions analysis and identifying signs of “objective bankruptcy”. For potential investors, a scenario assessment model has been developed, which makes it possible to determine the benefits, opportunity costs, the feasibility of merger or acquisition of a distressed company, the cost of its restoration and integration, and the synergetic effect of such M&A.

Cross-border Insolvency Protocols: Cooperation, Coordination, and Communication Duties under the European Insolvency Regulation Recast

Cross-border insolvency protocols are a practical phenomenon developed at the international level in the last 30 years. These protocols are agreements entered by the insolvency practitioners to facilitate cooperation and communication between insolvency practitioners and courts involved in cross-border insolvency proceedings. Protocols have been mentioned but not regulated by the European Insolvency Regulation Recast. This contribution seeks to analyse the aims, principles, and standard features of the protocols emerging in practice. Second, it aims to evaluate how this phenomenon fits with the duties of cooperation, coordination, and communication within the European Insolvency Regulation Recast to define the scope and role of protocols within the EU member states. Cross-border insolvency, protocols, transnational, cooperation, coordination, communication, European Insolvency Regulation

Hugh Sims QC et al, Insolvency Practitioners: Appointment, Duties, Powers and Liability

Hugh Sims QC et al, <i>Insolvency Practitioners: Appointment, Duties, Powers and Liability</i>

Life after debt: The governmentalities of debt relief

To avoid a ‘tsunami’ of repossessions in the years following the global financial crisis, Ireland reformed its system of debt relief in 2013. For the first time Ireland was to have a state-of-the-art system to help debtors discharge their unpayable liabilities, at odds with the punitive Victorian system of bankruptcy which preceded it. While these changes were touted as ground-breaking and innovative, I demonstrate through original qualitative research with debtors, and the Insolvency Service of Ireland's (ISI's) operators that little has changed. When disaster strikes and debtors fall behind on payments, they are encouraged to undergo a process of soul searching and self-criticism involving reflection on their behaviour and finances. This article explores how this governmentalisation of debt and its relief creates responsible financial subjects fit for the market, simultaneously ensuring the stability of the fragile Irish credit system. The insolvency practitioners who run the service advise that only by confessing their wrongdoing (i.e. irresponsible spending), and making lasting change can they become worthy of debt relief.

SOME ADMINISTRATIVE LAW ASPECTS OF STATE REGULATION OF INSOLVENCY LAW REVISITED Musenwa v Master of the North Gauteng High Court (Unreported 54849/10) [2010] ZAGPPHC 190 (5 November 2010)

A general analysis of the global norms recognised by international institutions worldwide yields the conclusion that the essential proposition of insolvency practitioners in all systems is the same: that every effective insolvency system requires competent and ethical insolvency practitioners who should have the experience and expertise necessary to deal with the range of business and legal issues which arise in insolvency matters. In Standard Bank v The Master of the High Court (2010 4 SA 405 (SCA)) the Supreme Court of Appeal also held that liquidators occupy a position of trust towards creditors and companies in liquidation and that they are required to beindependent, to regard equally the interests of all creditors, and to carry out their duties without fear, favour or prejudice. This contribution is a discussion of the recent decision in Musenwa v Master of the North Gauteng High Court ((Unreported) 54849/10) [2010]ZAGPPHC 190 (5 November 2010)) in which the core issue was to decide on the competence and integrity of an insolvency practitioner in order to decide whether the Master of the High Court (Master) acted lawfully in removing the practitioner from its panel. The note will attempt to underline the importance of a fresh approach by policy and law makers to the concept of regulation of South African insolvency law.