Key Objectives of an Effective and Efficient Insolvency Law
Legislative Guide on Insolvency Law (2005)
United Nations Commission on International Trade Law
Section: Designing the Key Objectives and Structure of an Effective and Efficient Insolvency Law
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A. Introduction. B. Establishing the key objectives. 1. Provision of certainty in the market to promote economic stability and growth. 2. Maximization of value of assets. 3. Striking a balance between liquidation and reorganization. 4. Ensuring equitable treatment of similarly situated creditors. 5. Provision for timely, efficient and impartial resolution of insolvency. 6. Preservation of the insolvency estate to allow equitable distribution to creditors. 7. Ensuring a transparent and predictable insolvency law that contains incentives for gathering and dispensing information. 8. Recognition of existing creditor rights and establishment of clear rules for ranking of priority claims. 9. Establishment of a framework for cross-border insolvency. Recommendations 1-5. C. Balancing the goals and key objectives of an insolvency law. Recommendation 6. D. General features of an insolvency law. 1. Substantive issues. 2. The structure of an insolvency law. 3. Relationship between insolvency law and other law. Recommendation 7.
Key Objectives of an Effective and Efficient Insolvency Law
UN Publications No. E.05.V.10
Adopted by UNCITRAL on 25 June 2004 A. Introduction. 1. When a debtor is unable to pay its debts and other liabilities as they become due, most legal systems provide a legal mechanism to address the collective satisfaction of the outstanding claims from assets (whether tangible or intangible) of the debtor. A range of interests needs to be accommodated by that legal mechanism: those of the parties affected by the proceedings including the debtor, the owners and management of the debtor, the creditors who may be secured to varying degrees (including tax agencies and other government creditors), employees, guarantors of debt and suppliers of goods and services, as well as the legal, commercial and social institutions and practices that are relevant to the design of the insolvency law and required for its operation. Generally, the mechanism must strike a balance not only between the different interests of these stakeholders, but also between these interests and the relevant social, political and other policy considerations that have an impact on the economic and legal goals of insolvency proceedings. To the extent that it is excluded from the scope of such legal mechanisms, a debtor and its creditors will not be subject to the discipline of the mechanism, nor will they enjoy the protections provided by the mechanism. 2. Most legal systems contain rules on various types of proceeding (which are referred to in this Legislative Guide by the generic term "insolvency proceedings") that can be initiated to resolve a debtor's financial difficulties. While addressing that resolution as a common goal, these proceedings take a number of different forms for which uniform terminology is not always used and may include bot...
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