The Role of Social Policy in Corporate Rescue and Restructuring: A Messy Business

Abstract

The interplay between economic and social policies has ever been best by the tensions between competing values: capital versus labour. Insolvency law is an intersection between capital and labour, along with a number of other interests, which makes finding common ground between different jurisdictions difficult, which is evident in the challenges faced by harmonisation efforts in the EU. Despite this inherent mix between conflicting policy areas, little space has been devoted by insolvency theorists to better balance these matters, though some commentary is certainly present that suggests a balance is needed, such as the publications of Elizabeth Warren. As insolvency is designed to resolve a particular problem associated with social exigency, moral conflict, and political compromise as described by David Carlson, financial failure tends to be treated by the numbers. However, the result of over indebtedness and financial failure is messy, and it is the messiness that collective procedural frameworks have been created to control and improve for the benefit of all creditors and, more recently, stakeholders in the future of the company. Add to that the pull of social policy initiatives, and the regulatory entanglement becomes tortuous.

The purpose of this chapter is to examine some of the competing insolvency theories or policies that contradict the creditors’ bargain and allow for a consideration of social policy matters; explore the interplay between social policy and insolvency and restructuring, focusing on the introduction of the new EU Preventive Restructuring Directive; consider and compare the approach to social policy as it intersects with insolvency and restructuring in the EU as well as two key restructuring destinations of both the UK and the USA; and finally to consider what the position may be given the crises of health and economies encountered in 2020 that affect both social and financial/economic issues globally.

Keywords: social policy; economic policy; insolvency law; insolvency theory; employment law

JEL Classification: G3, J8