Corporate Insolvency in the United Kingdom: The Impact of the Enterprise Act 2002

Armour John, Hsu Audrey and Walters Adrian
Additional contact information
Armour John: Lovells Professor of Law and Finance, Faculty of Law, University of Oxford.
Hsu Audrey: Associate Professor, Department of Accounting, National Taiwan University.
Walters Adrian: Geldards LLP Professor of Corporate and Insolvency Law, Nottingham Law School, Nottingham Trent University.

European Company and Financial Law Review, 2008, vol. 5, issue 2, 148-171

Abstract: With effect from September 15, 2003, the Enterprise Act made significant changes to the governance of corporate rescue procedures in the United Kingdom which involved a shift away from a “concentrated creditor” model of governance towards a “dispersed creditor” model of governance which vests greater control rights in unsecured creditors collectively. These changes were motivated by fairness and efficiency concerns, notably the concern that the UK's administrative receivership procedure was not conducive to rescue outcomes and operated to the detriment of unsecured creditors. This article discusses the Enterprise Act reforms in the context of wider theoretical debates about the desirability (or otherwise) of secured creditor control of corporate rescue procedures. It then presents in summary form the findings of an empirical study carried out by the authors that sought to evaluate the impact of the Act by comparing the gross realizations, costs and net returns to creditors in a sample of 284 corporate insolvencies commenced before and after the law changed. Whilst we find that gross realizations have increased under the streamlined administration procedure introduced by the Act when compared with the old receivership procedure, we also find that costs have increased. These findings imply that secured creditor control of the insolvency procedure (as in receivership) may be no worse for unsecured creditors than control by dispersed unsecured creditors (as in administration) at least as regards returns.

Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.1515/ECFR.2008.148 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:eucflr:v:5:y:2008:i:2:p:148-171:n:2

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/ecfr/html

DOI: 10.1515/ECFR.2008.148

Access Statistics for this article

European Company and Financial Law Review is currently edited by Heribert Hirte

More articles in European Company and Financial Law Review from De Gruyter
Bibliographic data for series maintained by Peter Golla ().