Topic: Cross Border Insolvency Instructions: Question: In relation to the respective >rescue= processes of the insolvency law regimes of USA, Australia and UK, outline: a ) common characteristics b) any significant differences In any case: c) how compatible are those processes d) how would the event of any incompatability affect the development and employment of a cross border recognition and assistance law between those jurisdictions Perhaps one should, from the outset, seek to clarify what is usually meant by the term >rescue= in the various legal regimes under consideration.
Some legal regimes refer to the concept of rehabilitation. However in most cases, the latter concept is taken to refer to the rehabilitation of the person who would have been engaged in business and who >finds= himself in a situation of an inability to satisfy his debts. Within the more advanced legal systems when the latter deals with insolvency and bankruptcy, one usually finds a mechanism which would come in force given certain predetermined circumstances. This mechanism has the scope of actually attempting to minimise the various not so desirable effects, both on the individuals concerned as well as on the business units involved, which a situation of insolvency brings about.
It can be said to be a recognition of the fact that a situation of insolvency not only effects the person or company who or which is going through a process of bankruptcy but ultimately effects also the economy as a whole. In fact the amount of bankruptcies currently being undergone within a country is usually taken as an indication of how well that particular economy is faring. In the UK a review Group within the Department of Trade and Industry and HM Treasury opined that the trend seems to favour furthering the rescue culture.
Whenever possible emphasis should be laid on the assisting of companies in order that the latter might be placed in a position to as much as possible overcome what may in the ultimate analysis be temporary financial difficulties. It is submitted that in these types of situations, the problem is to assess exactly how temporary is temporary and numerous instances occour when what started off as being temporary resulted in the end of being permanent.
In that report the emphasis seemed to be placed on the possible avoidance of liquidation and towards the furthering of a culture of a predisposition towards the preservation of a business unit as a going concern1. Before the coming into force of the 1986 Insolvency Act in the UK, there were three kinds of liquidation procedures, namely members, creditors= and compulsory when the company was insolvent.
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