The Importance of the Structure of the Insolvency System for Facilitation of Business Operators' Reorganisation

• Author: Kadriann Habakukk
• Position: Master of Arts in Law Associate, Law Office Varul
• Pages: 99-106

99

JURIDICA INTERNATIONAL XIX/2012

Kadriann Habakukk

Master of Arts in Law

Associate, Law Offi ce Varul

The Importance of the Structure

of the Insolvency System

for Facilitation of Business

Operators’ Reorganisation

1. Introduction

The United Nations Commission on International Trade Law*1, The World Bank*2, and the International

Monetary Fund*3 have all recommended that states create, via legislation, options for the reorganisation

of business operators. Although procedural alternative allowing the reorganisation of a business operator

may be found in the insolvency laws of nearly all states today, countries vary in the thresholds that have to

be met for initiation of reorganisation proceedings and in how reorganisation proceedings are positioned

vis-à-vis bankruptcy proceedings structurally. The insolvency system’s ability to promote reorganisation

via legislation is another area in which states vary signifi cantly.

The purpose of this article is to give an answer as to whether the structure of the insolvency system may

help to promote the reorganisation of business operators in those situations wherein reorganisation should

be preferred to liquidation. Also discussed is whether enabling the reorganisation of insolvent business

operators may help to prevent the liquidation of viable business operators whose sustainable management

after reorganisation would be possible in those kinds of insolvency systems whose structure does not pro-

mote reorganisation in appropriate cases.

2. The position of reorganisation in the system

of objectives for insolvency law

In the structuring of their insolvency systems, states are—or at least should be—guided by the objectives

of their insolvency law. Differences amongst states in terms of insolvency law range from the fundamental

facts of their legal philosophy, specifi cally the key issue of whether the law is directed primarily at the pro-

1 Legislative Guide on Insolvency Law. United Nations Commission on International Trade Law. New York 2005, p. 11. Avail-

able at http://www.uncitral.org/pdf/english/texts/insolven/05-80722_Ebook.pdf (most recently accessed on 7.4.2012).

2 Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. The World Bank 2001, p. 6. Available at

http://www.worldbank.org/ifa/FINAL-ICRPrinciples-March2009.pdf (most recently accessed on 7.4.2012).

3 Orderly & Effective Insolvency Procedures: Key Issues. International Monetary Fund 1999. Available at http://www.imf.

org/external/pubs/ft/orderly/index.htm (most recently accessed on 7.4.2012).