Insolvency in a group of companies, substantive and procedural consolidation : when and how?

Abstract

This paper briefly discusses the problem of assigning liability among members of a group ofrelated companies wh en one or more of them becomes insolvent.The issue is cam mon and important) as business structures composed of several related companies tend to be the rule, especially in multi-national business.The traditional uatomistic" approach is unsatisfactory: it privileges form over substance; ignoring the existence of the group, it considers that each one of its components is a separa te and autonomous legal entity.This paper th us explores the consolidated approach, which treats groups of related companies as a single entity, either for generalliability purposes or for procedural convenience, and the variety of tests that might be applied in choosing whether and to what degree to do so.

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