Business & Law Research Network

Resolving financial distress and insolvency

Restructuring and insolvency laws play a pivotal role in addressing the often conflicting interests of stakeholders of financially distressed companies. Whereas financial distress is an inherent risk of entrepreneurship in market-based economies, legal tools serve an important role to ensure an orderly and effective resolution of the financial distress. Our research aims to critically assess the effectiveness of restructuring and insolvency frameworks in the Netherlands and beyond.

In recent years, successive reforms of restructuring and insolvency laws have introduced new and more extensive tools to deal with financial distress. Whereas the focus has traditionally been on developing effective mechanisms to deal with substantively insolvent companies by means of liquidation oriented proceedings, this is shifting. Among others, the European Union has been a driving force toward a stronger rescue culture, enticing reforms to pursue restructuring and prevent the unnecessary liquidation of economically viable businesses.

Furthermore, recent developments have put harmonisation of insolvency law on the legislative agenda. This invites legislators, practitioners, and academics to rethink the existing approaches and concepts applied in restructuring and insolvency law.

Subject to limited time and lacking financial resources, restructuring and insolvency laws aim to provide debtors with effective tools to pursue maximisation of the value of the debtor’s estate. A complex endeavour, in particular due to increased cross-border activities of debtors and more extensive consideration of diverse stakeholder interests.

Our research looks into how restructuring and insolvency laws can play an effective role in today’s economy by using legal dogmatic, empirical and legal comparative research methodologies.