The dynamics of insolvency law: three models of reform

Abstract

The credit crisis has introduced a period of turbulence in insolvency law and it is essential that we are clear about the factors that are driving and should drive reforms. Three models of insolvency law reform can be distinguished: the ‘adaptive’, the ‘strategic’ and the ‘redirective’ approaches. An examination of four recently canvassed reforms of corporate rescue procedures raises questions about the ways in which insolvency processes are developed in this commercially important area. The reforms discussed relate to: new court-supervised restructuring procedures; super-priority funding; imports from Chapter 11; and bespoke rules for the financial sector. Seeing insolvency reforms in terms of the three proposed models offers the prospect of increased clarity on the case for legal change. This approach suggests that reform proposals can be assessed with explicit reference to three identifiable questions. Do changes in market conditions or other factors demand adjustments in insolvency law approaches? Are strategic shifts needed in order to advance established objectives? Is there a case for changing the objectives of insolvency law?

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