Chapter 2: Corporate Restructuring Law in the UK
1. Introduction This book compares and contrasts corporate rescue (reorganisation) procedures in the UK and the US. A dedicated corporate rescue procedure has existed in the UK since the 1980s in the form of administration, or at least administration coupled with a company voluntary arrangement (CVA). In the US, corporate rescue law is much older, with the law now contained in Chapter 11 of the US Bankruptcy Code 1978. In 2002, by means of the Enterprise Act, UK law was moved in the US direction. US law in this area has traditionally been seen as very ‘pro-debtor’ compared with the UK, which is seen as ‘pro-creditor’.1 Part of the theme of the book is that this generalisation is, at best, a potentially misleading over-simplification. The book will ask a number of questions including the following: 1. Firstly, what values and purposes are served by reorganisation procedures? Such procedures are generally premised on the assumption that the ‘going-concern’ value of a business is greater than the liquidation value. The question arises, however, whether the concern of the law should simply be about creditor wealth maximisation or whether a business should be kept alive for other reasons. Related to this is the issue of the destination of the ‘surplus’ value that is captured during the reorganisation process. In distributing this ‘surplus’ value, is the law simply interested in respecting pre-insolvency legal entitlements or should a different set of interests enter into the equation during the reorganisation process? Why are the mechanisms for...
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