Pre-commencement aspects

• Author: United Nations Commission on International Trade Law
• Pages: 34-36

34 UNCITRAL Legislative Guide on Insolvency Law for Micro- and Small Enterprises

Other eects of conversion

370. e insolvency law should address other eects of conversion, including on

deadlines for actions, the stay of proceedings and other steps taken in the

proceeding being converted. (See recommendation 140.)

P. Appropriate safeguards and sanctions

371. e insolvency law providing for a simplied insolvency regime should

build in appropriate safeguards to prevent abuses and improper use of a simplied

insolvency regime and permit the imposition of sanctions for abuse or improper

use of the simplied insolvency regime, for failure to comply with the obligations

under the insolvency law and for non-compliance with other provisions of the

insolvency law. (See recommendations 20, 28 and 114.)

Q. Pre-commencement aspects

Obligations of persons exercising control over MSEs in

the period approaching insolvency

372. e law relating to insolvency should specify that, at the point in time when

the persons exercising control over the business knew or should have known that

insolvency was imminent or unavoidable, they should have due regard for the

interests of creditors and other stakeholders and take reasonable steps at an early

stage of nancial distress to avoid insolvency and, where it is unavoidable, to

minimize the extent of insolvency. Reasonable steps might include:

(a) Evaluating the current nancial situation of the business;

(b) Seeking professional advice where appropriate;

(c) Not commiing the business to the types of transaction that might be

subject to avoidance unless there is an appropriate business justication;

(d) Protecting the assets so as to maximize value and avoid loss of key assets;

(e) Ensuring that management practices take into account the interests of

creditors and other stakeholders;

(f ) Considering holding informal debt restructuring negotiations with creditors;

and

(g) Applying for commencement of insolvency proceedings if it is required or

appropriate to do so.

(See recommendations 255, 256 and 257.)