AN ECONOMIC EVALUATION OF INSOLVENCY PROCEDURES IN THE UNITED KINGDOM: DOES THE 1986 INSOLVENCY ACT SATISFY THE CREDITORS' BARGAIN?

The creditors' bargain view of insolvency law argues that solvency stats rights should be preserved in insolvency states. It argues that insolvency law should be an extension of commercial law. This paper examines the Insolvency Act (1986) in the United Kingdom from the perspective of the creditor's bargain. It argues that the receivership systems supplemented with the new administration procedures preserves initial rights. The paper argues that this is a structure conducive to economic efficiency. It casts doubt on whether we need a formal reorganization procedure, like Chapter 11 of the United States Bankruptcy Code (1978), which allows a third party to arbitrate and encourages inefficient distributional games. Copyright 1991 by Royal Economic Society.

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