Insolvency courts: General principles for systems design

Abstract

This article sets out general principles for designing the role of corporate insolvency courts. The authors identify four general considerations relevant to that design: (a) the sophistication and development of the relevant private markets and private law, (b) the applicable background corporate law principles, (c) the competence—in terms of experience and sophistication, capacity and resources, efficiency, and neutrality and lack of corruption—of the courts in question, and (d) the availability of alternative systems through forum and venue shopping or other forms of exit. Having identified these considerations, the article then explores how each affects the role that insolvency courts should play and the level of discretion courts should exercise. The authors also discuss the extent to which other procedural or insolvency provisions can substitute for judicial oversight and discretion.