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
Kadriann Habakukk
Master of Arts in Law
Associate, Law Of 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 signi 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, speci 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 (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 (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).

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