Nocilla, Alfonso Salvatore; (2019) Corporate Rescue at the Crossroads. Doctoral thesis (Ph.D), UCL (University College London).

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Abstract

This thesis draws on new datasets of insolvency proceedings in two countries to examine corporate insolvency law in the United Kingdom (“U.K.”) from a comparative and quantitative empirical perspective. The primary focus is on pre-packaged administrations (“pre-packs”) carried out pursuant to Schedule B1 of the Insolvency Act 1986, as amended by the Enterprise Act 2002. In a pre-pack, an insolvent debtor company negotiates the sale of substantially all its assets on a going concern basis prior to initiating administration proceedings. Once administration proceedings are initiated, the pre-arranged deal is implemented and the sale is completed in short order. This thesis argues that pre-packs tend to give too much control to a debtor’s incumbent managers and secured creditors, and that this power imbalance often leads to worse outcomes for the debtor’s other stakeholders. This thesis begins by examining the key problems with pre-packs from a theoretical perspective, comparing them with similar processes in other countries, namely, sales under the Companies’ Creditors Arrangement Act1 in Canada (“liquidating CCAAs”) and quick sales under Section 363 of the Bankruptcy Code2 (“363 sales”) in the United States (“U.S.”). In particular, this thesis argues that the speed, lack of transparency and limited stakeholder participation inherent in these processes create opportunities for secured creditors to influence the actions of an insolvent debtor’s senior managers, effectively aligning the interests of the secured creditors with those of management and leading to suboptimal outcomes for the debtor’s stakeholders as a group. The thesis examines originally collected quantitative data on pre-packs and liquidating CCAAs, as well as data on 363 sales collected by other scholars, to illustrate correlations between these processes and suboptimal outcomes for many stakeholders in insolvency. The thesis concludes by recommending reforms of the pre-pack, liquidating CCAA and 363 sales regimes to address the shortcomings of these processes and ensure that they will further, rather than undermine, the normative goals of insolvency law.

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