Does Insolvency Law Need Reform Essay Example | Topics and Well Written Essays - 1000 words

Does Insolvency Law Need Reform - Essay Example This method is considered by many as outdated. Over the previous few years, laws have been enacted that are aimed at reforming insolvency laws in some of these countries such as the U.K., Germany, and France1. This essay looks at and analyzes some of those proposals, enactments, consultation reports, and reviews as regards to the insolvency law so as to ascertain whether this law is fit for the purpose as it currently is. In so doing, measures will be solidly detailed that are meant to offer struggling, but feasibly viable ventures a chance of working their way out of such difficult situations. Discussion The promotion of company rescue customs began with the work of the Cork committee which recommended disposal and continuation of a debtor’s business as a going concern and was bolstered by the Insolvency Act, 1986 which recommended administrative take-up through procedures outlined in the Administration and Company Voluntary Arrangement (CVA). Subsequently, there have been in creasing outcries from different quarters regarding the inability of this act to ensure successful administrative receivership without causing unnecessary closure of otherwise viable companies. In addition, questions have been asked of whether administrative receivership provides for acceptable and better levels of accountability and transparency to all the stakeholders in the said business, most importantly, creditors. For these reasons, the U.K. government embarked on putting into place mechanisms that will not only ensure successful administrative receiverships, but also the balance of the insolvency law to be debtor-friendly and creditor friendly. Most of these law reviews, consultations, and proposals have aimed at exploring ways in which the government have attempted and should attempt to better develop the insolvency law and practice so that where company rescue attempts are made, all those with a stake in the company being rescue, benefit from such a process. This ensures th at economic and fiscally viable companies survive in the long-run. Creditors are also guaranteed higher and better returns. The challenge, however, is whether the balance in the insolvency regime of the U.K. should be shifted to being debtor- friendly as well rather than being only creditor-friendly. In 2002, the U.K. government enacted the Enterprise Act of 2002 which was the advent of a new corporate insolvency law regime. This was entirely bolstered by the consideration by many that the then insolvency law era was not equitable and adequately rescue-oriented. In order to change that, the Enterprise Act of 2002 implements several modifications and changes to that era. According to the UK Secretary of State, Trade and Industry, Patricia Hewitt, the enterprise act of 2002 will empower consumers and strengthen competition through radical reforms of the law of competition, corporate rescue and bankruptcy. At the same time, new safeguards for consumers will be promoted. According to th e Enterprise Act, 2002, several measures aimed at reforming and restructuring corporate insolvency were introduced. These included an administration procedure that is streamlined in a way that it could be accessible and efficient so as to ensure successful rescue of viable ventures. Secondly, the administrative receivership is abolished to a certain extent2. Finally, the act also introduced measures that would ensure