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level: Aims and Objectives

Questions and Answers List

level questions: Aims and Objectives

QuestionAnswer
maximising returns to creditorsthe reality of insolvency is that there will be a paucity of assets and, therefore, all creditors will not be repaid at all or in full. Insolvency law is therefore concerned with maximising repayment to creditors. It does so by enabling the office-holder to gather available assets, realize their monetary value, swell that value by utilising any avoidance powers in insolvency legislation, and then distribute the resulting value to all creditors in accordance with their pre-insolvency entitlements and in a rateable manner
providing for a fair and equitable ranking of creditor claimsinsolvency law heralds the principle that all creditors are collectively (not equally) entitled to the available assets of the debtor. Therefore, indi- vidual rights of enforcement are suspended in favour of a collective regime. However, this collective entitlement is based on an established hierarchy of claims in insolvency, which is based on a combination of pre-insolvency agreements, insolvency legislation, common law principles, property law and company law
rescue of troubled debtorsCVA and the standalone moratorium, which give distressed entities a second chance by enabling the office-holder with powers to restructure or rehabilitate the ailing company
policing mismanagementinsolvency law is therefore concerned with deterring and punishing managers/directors/officers who have engaged in fraudulent and/wrongful conduct, leading to the debtor’s insolvency
termination of director's powersThe office-holder steps into the shoes of the directors and acts on behalf of the insolvent company or debtor. As a general rule, English insolvency polity is management-displacing. The logic behind this is simple: you wouldn’t want to leave drunks in charge of the pub, would you?
creation of a 'statutory trust'in order to effect an equitable distribution of the debtor’s available assets among its creditors, an insolvent debtor is no longer the beneficial owner of the assets and holds them on trust for the purpose of effecting the insolvency scheme of distribution.
status of pre-insolvency entitlementscreditors’ entitlements in insolvency will mirror their pre-insolvency position. Thus, a secured creditor with priority over unsecured creditors pre-insolvency should, generally, expect to be in a sim- ilar position in insolvency.