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Rethinking insolvency law amid the COVID-19 pandemic

Rethinking insolvency law amid the COVID-19 pandemic Amid the COVID-19 pandemic, it is important to consider the effectiveness of insolvency law given the increase in companies facing financial distress. Current insolvency law was not designed in the context of the unprecedented challenges of the pandemic. Therefore, it may not provide the framework needed to assist the rehabilitation of distressed companies that is important to economic recovery. The purpose of this paper is to briefly discuss the rethinking of insolvency law policy with a view to maximising opportunities for rescue and rehabilitation.Design/methodology/approachThe commentary offers suggestions on how insolvency law can maximise opportunities for rehabilitation. The approach is to consider competing theoretical perspectives on the objective of insolvency law and provide commentary on rethinking key insolvency law provisions to better meet the needs of distressed businesses in the unprecedented circumstances of the pandemic and into the future.FindingsThis paper concludes that in the context of the pandemic insolvency policy that is value-based and debtor-friendly is needed to promote rehabilitation. Insolvency law should refocus on debtors and rehabilitation rather than being excessively focussed on the interest of creditors.Originality/valueThis paper offers a unique and timely commentary on the capacity of insolvency law to respond to the unforeseen COVD-19 pandemic. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Pacific Accounting Review Emerald Publishing

Rethinking insolvency law amid the COVID-19 pandemic

Pacific Accounting Review , Volume 33 (2): 7 – Aug 10, 2021

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0114-0582
eISSN
0114-0582
DOI
10.1108/par-08-2020-0116
Publisher site
See Article on Publisher Site

Abstract

Amid the COVID-19 pandemic, it is important to consider the effectiveness of insolvency law given the increase in companies facing financial distress. Current insolvency law was not designed in the context of the unprecedented challenges of the pandemic. Therefore, it may not provide the framework needed to assist the rehabilitation of distressed companies that is important to economic recovery. The purpose of this paper is to briefly discuss the rethinking of insolvency law policy with a view to maximising opportunities for rescue and rehabilitation.Design/methodology/approachThe commentary offers suggestions on how insolvency law can maximise opportunities for rehabilitation. The approach is to consider competing theoretical perspectives on the objective of insolvency law and provide commentary on rethinking key insolvency law provisions to better meet the needs of distressed businesses in the unprecedented circumstances of the pandemic and into the future.FindingsThis paper concludes that in the context of the pandemic insolvency policy that is value-based and debtor-friendly is needed to promote rehabilitation. Insolvency law should refocus on debtors and rehabilitation rather than being excessively focussed on the interest of creditors.Originality/valueThis paper offers a unique and timely commentary on the capacity of insolvency law to respond to the unforeseen COVD-19 pandemic.

Journal

Pacific Accounting ReviewEmerald Publishing

Published: Aug 10, 2021

Keywords: COVID-19; Pandemic; Insolvency policy

References