The value of flexibility in insolvency procedures

During the past two decades a large number of countries around the world have made substantial changes to their insolvency systems. In many cases, the reforms entail a shift to a dual chapter insolvency system (i.e. liquidation and reorganization), inspired by the US Chapter 7/Chapter 11 procedures. However, empirical evidence from the US, Europe and Asia points to significant problems in many reorganization procedures, as for instance highly distressed companies are allowed to enter the procedure, which reduces success rates. The Belgian Law on the Continuity of Enterprises introduced a multi-option insolvency framework (ranging from semi-informal agreements with creditors to the forced sale of parts of a company) which offers more flexibility than is common in most other countries. The focus of the PhD research in this topic will be on the value added of this extra flexibility on the insolvency system’s efficiency. The research will be facilitated due to the cooperation of a private industry partner.