With effect from September 15, 2003, the Enterprise Act made significant changes to the governance of corporate rescue procedures in the United Kingdom which involved a shift away from a "concentrated creditor" model of governance towards a "dispersed creditor" model of governance which vests greater control rights in unsecured creditors collectively. These changes were motivated by fairness and efficiency concerns, notably the concern that the UK's administrative receivership procedure was not conducive to rescue outcomes and operated to the detriment of unsecured creditors. This article discusses the Enterprise Act reforms in the context of wider theoretical debates about the desirability (or otherwise) of secured creditor control of corporate rescue procedures. It then presents in summary form the findings of an empirical study carried out by the authors that sought to evaluate the impact of the Act by comparing the gross realizations, costs and net returns to creditors in a sample of 284 corporate insolvencies commenced before and after the law changed. Whilst we find that gross realizations have increased under the streamlined administration procedure introduced by the Act when compared with the old receivership procedure, we also find that costs have increased. These findings imply that secured creditor control of the insolvency procedure (as in receivership) may be no worse for unsecured creditors than control by dispersed unsecured creditors (as in administration) at least as regards returns.

This paper offers an appraisal of the recent reforms of personal insolvency law introduced in England and Wales by the Enterprise Act 2002 which came into force on 1 April 2004. The paper suggests that the new law has four key structural elements: (i) the reduction in the duration of bankruptcy, (ii) the lifting of statutory restrictions and disabilities hitherto imposed on undischarged bankrupts, (iii) the new regime of post-discharge restrictions for so-called "culpable" bankrupts, (iv) the introduction of a "fast-track" post-bankruptcy individual voluntary arrangement procedure supervised by the official receiver. The new law is examined in the light of the policies that it seeks to promote and the implications for debtor incentives are considered. The paper's principal conclusions are (i) that the legal incentives for debtors to opt for an individual voluntary arrangement rather than bankruptcy do not appear to be particularly compelling and (ii) that the significant investment requiredin a system that differentiates between "honest" and "culpable" bankrupts will only be worthwhile if credit providers are prepared to treat the former significantly more favourably than the latter. 2 impact of the Enterprise Act on corporate insolvency, less attention has been given to the Act's reform of the law of personal insolvency. Yet in a society experiencing record levels of personal indebtedness, there is an increasing need to ensure that the available legal responses to individual financial distress are appropriate and fit for purpose. This paper therefore seeks to redress the balance by offering an appraisal of the present bankruptcy system. A. INTRODUCTIONTheIn a speech to the British American Chamber of Commerce in New York inOctober 1998, the then Trade Secretary, Peter Mandelson, gave the first public indication that reform of personal insolvency law was on the agenda:"We need to examine all our regulatory systems to ensure they do not needlessly deter entrepreneurs such as our bankruptcy laws. Are we sure that they create confidence in enterprise and commerce? I don't think we are confident. I think we need fundamentally to re-assess our attitude in Britain to business failure. Rather than condemning it and discouraging anyone from risking failure, we need to encourage entrepreneurs to take further risks in the future. Here in the United States, I am told that some investors actually prefer to back businessmen and women with one or more failures under their belt because they appreciate the spirit of enterprise shown and recognise the experience that has been gained from it. Can you imagine that in Britain? Rather than sharing the risks with entrepreneurs in this way, most creditors are much more wary of supporting those who have experienced business failure, indeed many of them, including a lot of our high street banks, just run a mile from anyone who taken a leap [sic], taken the risk, failed but wants to try again and those people should be backed." 2 According to this vision, the liberalisation of personal i...

AcknowledgementsWe gratefully acknowledge financial assistance from the UK Insolvency Service. We are also most grateful to Sandra Frisby for her assistance in providing access to her dataset of company failures for the purpose of identification of completed cases, and to our professional interviewees for their time and insights. We thank Douglas Baird, Bernie Black, Regis Blazy, Sandra Frisby, Meziane Lasfer, Kate Litvak, Andrew Martin, Ed Morrison, Margo Schlanger, Jay Westbrook and Ning Zhu for helpful comments and discussions on earlier drafts. This paper has benefited from comments Recent theoretical literature has debated the desirability of permitting debtors to contract with lenders over control rights in bankruptcy. Proponents point to the monitoring benefits brought from concentrating control rights in the hands of a single lender. Detractors point to the costs imposed on other creditors by a senior claimant's inadequate incentives to maximise net recoveries. The UK provides the setting for a natural experiment regarding these theories. Until recently, UK bankruptcy law permitted firms to give complete ex post control to secured creditors, through a procedure known as Receivership. Receivership was replaced in 2003 by a new procedure, Administration, which was intended to introduce greater accountability to unsecured creditors to the governance of bankrupt firms, through a combination of voting rights and fiduciary duties. We present empirical findings from a hand-coded sample of 340 bankruptcies from both before and after the change in the law, supplemented with qualitative interview data. We find robust evidence that whilst gross realisations have increased following the change in the law, these have tended to be eaten up by concomitantly increased bankruptcy costs. The net result has been that creditor recoveries have remained unchanged. This implies that dispersed and concentrated creditor governance in bankruptcy may be functionally equivalent.JEL Codes: G33, K22, G21

Since the mid-1990s the number of consumer insolvencies in England and Wales has grown exponentially. The UK's Insolvency Act 1986 offers two formal responses to personal insolvency: bankruptcy and individual voluntary arrangements ("IVAs"). While consumers have used both these debt relief mechanisms in increasing numbers in recent years, IVAs − regulated agreements between debtors and creditors facilitated by a licensed insolvency practitioner, usually taking the form of a five-year payment plan − grew faster than bankruptcies between 2003 and 2006. However, the level of new IVA approvals fell back in 2007 and the first half of 2008. This article charts the transformation of the IVA from a bankruptcy alternative originally designed for insolvent traders and professionals into a tool of consumer debt relief. It then seeks to explain both the stellar rise in IVA usage among consumer debtors and the subsequent stalling of IVA growth. The rise of consumer IVAs can be attributed largely to supply side changes in the market for debt resolution − in particular the emergence of volume providers commonly referred to as 'IVA factories' − while a sustained backlash against the procedure and the providers instigated by institutional creditors demanding higher recoveries accounts for the subsequent decline in approvals. The article concludes by considering the near-term prospects for consumer IVAs within the context of the increasingly complex UK debt resolution market.

The decade since the financial crisis has witnessed a proliferation of various 'light touch' financial restructuring techniques in the form of so-called pre-insolvency proceedings. These proceedings inhabit a space on the spectrum of insolvency and restructuring law, somewhere between a pure contractual workout, the domain of contract law, and a formal insolvency or rehabilitation proceeding, the domain of insolvency law. While, to date, international insolvency instruments have tended to define insolvency proceedings quite expansively, discussion of the cross-border implications of pre-insolvency proceedings has barely begun. The question is whether pre-insolvency proceedings should qualify as proceedings related to insolvency for the purpose of private international law characterization. The risk is overinclusivity of cross-border insolvency law, which, where it is based on universality and unity, might defeat contractual expectations. This article argues, however, that we should be slow to exclude pre-insolvency proceedings from cross-border insolvency law: these proceedings are initiated in the zone of insolvency, their effectiveness depends on a statutory mandate and not purely on private ordering, they interact and intersect with formal proceedings, and can benefit from the unique system developed by cross-border insolvency law. We suggest, though, that modified universalism (the leading norm of cross-border insolvency) and international insolvency instruments, should, and are able to, adjust to the peculiarities of preinsolvency proceedings to address concerns about inclusivity and accommodate preinsolvency proceedings adequately.Keywords Insolvency · Restructuring · Pre-insolvency proceedings · Cross-border insolvency · Private international law · Modified universalism All uniform resource locators cited in footnotes were live on 4 February 2020.