The analogy that exists between corporate (solvency) and insolvency governance gives further insight into the restructuring and liquidation of insolvent debtors. Whilst a lot of scholarly attention, especially after the financial crisis in 2008, has been dedicated to corporate governance and the potential economic conflicts between shareholders and directors on the one hand and between majority and minority shareholders on the other hand no such research has been undertaken regarding insolvency governance.
Nonetheless, once a company is on the brink of insolvency, unsecured creditors take over the economic position as residual risk bearers formerly (during the company’s solvency) held by shareholders. Subsequently, this research critically assessed whether similar conflicts akin to the majority v. minority conflict between shareholders during the company’s solvency could also occur between unsecured creditors during or in the run-up to the company’s insolvency.
After having illustrated through recent cases that such conflicts between ‘majority’ (controlling) and minority (non-controlling) unsecured creditors could indeed arise and whereby some controlling factions of unsecured creditors might attempt to exploit their controlling position at the expense of the weaker/non-controlling factions of unsecured creditors, it was assessed how control, or the lack thereof, needed to be ascertained. This research hereby determined that more emphasis must be placed on the unsecured creditor’s actual/concrete legal position rather than merely having regard to abstract factors.
Allied to the determination of the non-controlling position of unsecured creditors, this research then critically assessed what the currently still existing legal and economic pitfalls and challenges are that non-controlling unsecured creditors risk to endure pursuant to the regulatory framework at present.
After having done so, the research focused on the insolvency values – efficiency, fairness and accountability – which, according to this research, ought to underpin the regulatory framework. Assessing what these insolvency values are and how they interact with one another was critical to be able to provide regulatory suggestions which would improve the regulatory position of non-controlling (i.e. weaker) unsecureds. As part of the suggestions, this research ended by focusing on both non-governance and governance-related suggestions. As part of the governance-related suggestions, a further distinction was made between private and public enforcement measures. Nonetheless, all the suggestions were measured against and based upon the aforementioned insolvency values.
