Corporate Insolvency Law – Vanessa Finch

On such matters, the existing management constitutes the major reservoir of relevant infor- mation and the administrator will need to use the resources that are represented by existing directors and employees.301 Co-ordination between directors and the IP is essential if information is to flow and, at this point, it is useful to consider the various factors that are likely to affect the degree to which the participants in administration will co-ordinate on the generation and use of information.

A first issue is commitment to the rescue enterprise and the incentives of different actors to co-operate in the pursuit of rescue. This is likely to be affected, in turn, by perceptions of personal, corporate or other gains but also by perceptions of, and confidence concerning, other actors’ incentives. Where interests are seen as divergent, this will undermine co-operation but so will uncertainty about motives and the alignment of interests. Directors, moreover, may possess personal incentives to control the flow of information into the rescue process.

Directors who want to prolong their employment at a company – for example while they seek new job opportunities – will be disinclined to precipitate action by the administrator by laying all their informational cards on the table. Instead they may seek to preserve uncertainty about the company’s position and future prospects so that the decision- maker is induced to delay taking decisions.302 It is arguable that the EA 2002 reforms will increase directorial incentives to stay on during the rescue process because the directors will recognise that IPs have rescue, and the interests of all creditors, in mind, rather than a predisposition simply to act rapidly to realise returns for the floating charge holder – as in the ‘old’ system of administrative receivership.

The first edition of Corporate Insolvency Law proposed a fundamentally revised concept of insolvency law – one intended to serve corporate as well as broader social ends. The second edition took on board a host of changes that reshaped insolvency law and practice, such as the consolidation of the rescue culture in the UK, the arrival of the ‘pre-packaged’ administration and the broad replacement of administrative receivership with administration.

It also considered the movement of an increasing amount of ‘insolvency work’ towards the pre-formal insolvency stage of corporate affairs, and the explosion, on the insolvency scene, of a new cadre of specialists in corporate turnaround. This third edition covers the array of new laws, policies and practices that have emerged in the wake of the financial crisis of 2008, and it examines the role of insolvency law in a commercial and financial environment that has changed considerably since the second edition was published.

This edition also includes a new chapter on the growing issue of cross-border insolvency. As with the first edition, this volume aims to provide a framework for evaluating insolvency procedures and laws, and a basis for shaping these so as to rise to evolving challenges. vanessa finch is a Professor of Law Emeritus at the London School of Economics and Political Science, where she taught Insolvency Law, Company Law and Corporate Accountability at undergraduate and Master’s levels. She has published a large number of scholarly articles in the insolvency and corporate law fields, she is a subscriber member of R3, and an honorary member of the Insolvency Lawyers’ Association.

david milman has studied corporate insolvency law since undertaking his PhD on the subject in 1976. He has published numerous texts and articles on the subject. He is an honorary member of the Insolvency Lawyers’ Association, a subscriber member of R3 and a Professorial Associate at Exchange Chambers. Before moving to the University of Lancaster in 2005, he taught at Manchester University for 27 years, where he was Dean of the Law School from 1995 to 1997.

This is a short excerpt from the opening of “” by Unknown, quoted for review and introduction purposes. All rights belong to the copyright holders.

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