Implementing an insolvency framework for micro and small firms

Abstract

Micro-, small-, and medium-sized enterprises (MSMEs) represent the vast majority of businesses in most countries around the world. Despite the economic relevance of these firms, most insolvency jurisdictions do not provide adequate responses to MSMEs. Moreover, with a few exceptions, the academic literature on insolvency law has not traditionally focused on the treatment of MSMEs in insolvency. This article seeks to contribute to the debate by exploring the primary features and problems of MSMEs in insolvency as well as the weaknesses of the ordinary insolvency framework to deal with MSMEs. It also provides a general overview of the primary reforms and policy recommendations taking place around the world to deal with MSMEs in insolvency. The article concludes by suggesting several strategies to design an efficient insolvency framework for MSMEs.