What Is An Insolvency Proceeding?
26 Pages Posted: 9 Jan 2016 Last revised: 16 Nov 2017
Date Written: November 1, 2017
Insolvency proceedings and issues relating to personal and business insolvencies are the daily subject of scholarly work and insolvency practice. But what is an insolvency proceeding? And why is this an important question? This article deals with a specific regulatory problem that is raised by these questions, namely: the necessary features of a proceeding in a cross-border context for the proceeding’s effects to merit immediate, universal recognition. The article’s goal is normative, i.e. it seeks to shape insolvency policy and lawmaking. Existing approaches to the regulatory problem examined in this article are used as a stepping-stone to develop a more convincing regulatory model. The article’s main thesis is that: in a cross-border context, only ‘fully collective’ proceedings should be characterized as insolvency proceedings such that their effects merit immediate universal recognition. Proceedings are fully collective in that sense if individual claim enforcement of all creditors is impeded, e.g., by a stay or by the possibility of rights modifications. Based on this test, U.S. Chapter 11 and the German Insolvenzordnung are insolvency proceedings. The French procédure de sauvegarde financiére accélérée, by contrast, is not an insolvency proceeding, and the English Scheme of Arrangement is not one either.
Keywords: Insolvency Proceedings, Bankruptcy Proceedings, Cross-Border Insolvencies, Chapter 11, Scheme of Arrangement, Procédure de Sauvegarde, Insolvenzordnung
JEL Classification: G33, K35, K41
Suggested Citation: Suggested Citation