Obviously, I can’t claim to be an expert on US insolvency law but, looking at it from this side of the Atlantic, it appears that the system is best suited to big companies, the bigger the better.
While I can see the political logic of trying to preserve large numbers of jobs in such companies, it appears that, even in the US, judging by some of the comments aimed at Kodak, that Chapter 11 has as many critics as it does advocates.
In fact, more often than not, it seems that smaller companies suffer at the hands of the Chapter 11 process rather than benefitting from it. Because whether it’s a UK administration or US Chapter 11, one thing is constant: unsecured creditors, typically smaller suppliers, are left holding the baby.
The suggestion that we need a better ‘debtor in possession’ procedure is equally flawed. After all, as highlighted in our cover story, we already have something similar in the UK – the company voluntary agreement/arrangement (CVA). And, let’s be honest, there’s a very good reason why a successfully completed CVA in print is rarer than hen’s teeth.
Certainly, something needs to be done to achieve a better balance between protecting creditors and safeguarding jobs. However, a slight tweak to the current system, to improve pre-pack transparency and give a little bit of power to the creditors – a bit like the one pooh-poohed by the coalition earlier this year, funnily enough – makes a lot more sense.
