Better Winding Up: A Proposal for Improved Winding Up of Executory Contracts
Discussion Paper of the Institute for Organisational Economics 4/2015
22 Pages Posted: 4 Mar 2016 Last revised: 8 Apr 2017
Date Written: April 1, 2015
An evaluation problem exists when winding up executory contracts in case of insolvency. The trustee has difficulties in accurately considering the claim for damages that arises if he chooses to reject a contract instead of accepting it. An unequal treatment of creditors and inefficiencies follow. However, a simple reform can solve this problem. If an executory contract is accepted by the trustee, there should be the same claim for damages as if it had been rejected. Only the difference between this claim for damages and the initial claim should be paid directly out of the estate.
Keywords: Bankruptcy, Executory Contracts, Insolvency, Winding Up
JEL Classification: G33, K39, K35, K22
Suggested Citation: Suggested Citation