Secured Credit and Partial Priority: Corporate Finance as a Creation or an Externalisation Practice?

Amsterdam Law School Research Paper No. 2018-24

Centre for the Study of European Contract Law Working Paper No. 2018-04

37 Pages Posted: 14 Sep 2018

See all articles by Roelf Jakob de Weijs

Roelf Jakob de Weijs

University of Amsterdam - Centre for the Study of European Contract Law (CSECL)

Date Written: September 11, 2018

Abstract

Four developments warrant revisiting the debate on full priority and taking steps to implement a partial priority system. The first development is that secured credit increasingly results in a complete lack of funds to cover the expenses of the insolvency procedure. The second development is that secured credit is often not doing what the proponents of full priority argue that it is doing, namely facilitating growth. Instead, it is increasingly used to simply facilitate the leverage of the company without any intent to invest in the company. Thirdly, the plight of unsecured creditor is deteriorating in new ways. Trade creditors in particular are increasingly forced into the position of being suppliers of credit, turning non-adjusting creditors into what can be referred to as adjustable creditors. The fourth development is that these trade creditors find insolvency laws increasingly working against them instead of for them.

Keywords: Insolvency, secured credit, corporate finance

JEL Classification: K11, K22

Suggested Citation

de Weijs, Roelf Jakob, Secured Credit and Partial Priority: Corporate Finance as a Creation or an Externalisation Practice? (September 11, 2018). Amsterdam Law School Research Paper No. 2018-24, Centre for the Study of European Contract Law Working Paper No. 2018-04, Available at SSRN: https://ssrn.com/abstract=3247548 or http://dx.doi.org/10.2139/ssrn.3247548

Roelf Jakob De Weijs (Contact Author)

University of Amsterdam - Centre for the Study of European Contract Law (CSECL) ( email )

P.O. Box 1030
Amsterdam, 1000 BA
Netherlands

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