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What Liquidation Does for Secured Creditors, and What it Does for You

35 Pages Posted: 22 Aug 2008  

Riz Mokal

South Square Chambers; University College London (UCL) - Faculty of Laws

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This article analyses the liquidation process, challenging the much repeated proposition that secured claimants stand outside liquidation. It is argued that this proposition (i) is a product of a misunderstanding of the dual duality in the nature of liquidation proceedings, in that, in principle, they serve both public and private functions, and they further the interests of both secured and unsecured creditors; (ii) overlooks how secured creditors benefit from liquidation, and also how unsecured creditors have a real interest in the proper administration of their debtor's encumbered assets; (iii) mistakes the secured creditor's choice in usually being able to gain immunity from the liquidation process, for a compulsion to stand exiled from this process; (iv) is incorrect as a matter of history and practice; and (v) is rendered unsustainable by the statutory text. It concludes that secured creditors have never stood outside liquidation, that liquidation is an important tool for the protection of their interests, and that it is right to require floating charge holders to pay their fair share of liquidation expenses.

Suggested Citation

Mokal, Riz, What Liquidation Does for Secured Creditors, and What it Does for You. Modern Law Review, Vol. 71, Issue 5, pp. 699-733, September 2008. Available at SSRN: https://ssrn.com/abstract=1245604 or http://dx.doi.org/10.1111/j.1468-2230.2008.00712.x

Riz Mokal (Contact Author)

University College London (UCL) - Faculty of Laws ( email )

Gower St
London WC1E OEG, WC1E 6BT
United Kingdom
+44 - (0)20 - 7679 1406 (Phone)
+44 - (0)20 - 7679 1461 (Fax)

HOME PAGE: http://www.ucl.ac.uk/laws/

South Square Chambers ( email )

3/4 South Square
Gray's Inn
London, WC1R 5HP
United Kingdom

HOME PAGE: http://www.southsquare.com/Riz_Mokal

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