Implementing an Insolvency Framework for Micro and Small Firms

Abstract

Micro, small and medium-sized enterprises (MSMEs) represent the vast majority of businesses in most countries around the world. Despite the economic relevance of small businesses, most insolvency jurisdictions do not provide adequate responses to MSMEs in insolvency. This article analyses the primary features and problems of MSMEs in insolvency as well as the weaknesses of the ordinary insolvency framework to deal with MSMEs. It also provides a general overview of the insolvency reforms for MSMEs implemented in various countries around the world, including Australia, Colombia, Myanmar, Singapore and the United States, as well as the policy recommendations suggested by the World Bank and UNCITRAL. The article concludes by proposing an insolvency framework to efficiently deal with MSMEs in insolvency.

Keywords: MSME, firms, insolvency, micro, restructuring, liquidation, auctions, stigma, entrepreneurship, discharge, access to finance