LLM Programme

Module summary

The module covers the law of England and Wales relating to the insolvency of companies. The principles of the law are studied together with the relevant statutory and case law authorities, and are evaluated in the light of evolving legal policy and proposals for reform. Although the course is primarily concerned with English law, some reference is made to developments in other jurisdictions. The impact of relevant aspects of EU law is also considered.

We deal with the winding up of insolvent companies and with the treatment of assets and claims upon liquidation. This also includes a consideration of the role played by various forms of security and quasi-security interests, including fixed and floating charges, in mitigating the impact of the company’s insolvency on certain creditors. Another important theme is the way the law aims to counteract improper or imprudent conduct on the part of directors and others with responsibility for the conduct of the insolvent company, resulting in increased risk of loss to creditors and others.

Module syllabus

Section 1. General Introduction to Insolvency Law.

(i) Evolution, objectives and principles.

A survey of the development of insolvency law, and its evolving objectives as reflected in case decisions and statutory provisions. The historic divergence between personal and corporate insolvency law: contrasts and consequences. Convergence in recent times: the major legislative reforms of 1986, 2000 and 2002. The present day regulation of the law and its administration.

(ii) Insolvency as a fact and as a legal concept.

Definitions of “insolvency”. Different tests applied to establish insolvency in various contexts. The meaning and relevance of "inability to pay debts".

(iii) Some fundamental principles: the principle of collectivity; the effect of bankruptcy and winding up on real and personal rights; the principle of pari passu distribution.

Section 2. The two forms of liquidation; from commencement to the liquidator’s appointment.

(i) Voluntary liquidation: principal features; advantages, uses and abuses; the nature and purpose of the 1986 reforms.

(ii) Compulsory Liquidation (Winding Up by the Court): principal features; grounds for petition; the winding up order and its consequences.

(iii) Liquidators: their status, duties and powers. Mode of appointment.

Section 3. The assets comprising the estate: their extent, administration and distribution.

(i) Defining and consolidating the estate available for creditors.

(ii) Security and quasi-security interests and their characterisation: the
impact of insolvency on such interests. Fixed and floating charges.
Registered and unregistered security interests; trust devices;
reservation of title.

(iii) Augmentation of the assets through avoidance of antecedent transactions: preferences; transactions at undervalue; floating charges given by insolvent companies; transactions defrauding creditors. Disclaimer of onerous property.

(iv) Proof of debts. Sequence of distribution of assets. Liquidation expenses. Preferential creditors. Secured and unsecured creditors. “Prescribed part” for unsecured creditors. Rights of set-off.

(v) The conclusion of the liquidation: dissolution of the company and discharge of the liquidator. Possibilities of a corporate “after-life”: resurrection and reburial.

Section 4. Improper trading and the duties of directors to creditors.

Fraudulent trading and wrongful trading. Misfeasance and breach of duty by directors and office holders. Phoenix operations and the counter-measures currently in place. Disqualification of directors and other penalties and sanctions. The investigative process; the human rights dimension. The role of the Insolvency Practitioner in operating the new legal regime.

Recommended materials

Legislative materials:
you will find it useful to own, and to bring to class, an up-to-date collection of insolvency legislation, such as Butterworths Insolvency Law Handbook (14th edition, 2012 edited by Michael Crystal QC and others), or Butterworths Company Law Handbook (26th edition, 2012). The latter work, though less comprehensive in relation to insolvency law materials, may be a convenient choice for those also studying Company Law, and can be purchased at a discount using a special order form available to those taking the course. (Note: you are allowed to take unmarked copies of these works into the examination).

Alternatively, other collections such as the Annotated Guide to the Insolvency Legislation by Sealy and Milman (15th Edn. 2012, published by Sweet & Maxwell) are a valuable study resource as well as providing a comprehensive collection of insolvency legislation. Bear in mind however that this collection, and any others which are annotated, may not be taken into the examination.

Textbooks: there are now several up-to-date textbooks which deal with corporate insolvency, either alone or in conjunction with individual insolvency. There is no requirement to purchase any of these, although you may find it convenient to have ready access to at least one such text for personal use. Some of these books can also be purchased at a discount by students registered for the course.

Roy Goode: Principles of Corporate Insolvency Law,(4th Edn, 2011)
I.F. Fletcher: The Law of Insolvency (esp. Parts II and III), (4th Edn. 2009, with Supplement 2011)
H. Rajak: Company Liquidations, (2nd Edn. 2005)
V Finch: Corporate Insolvency Law, Perspectives and Principles (2nd Edn. 2009)
R.J. Mokal: Corporate Insolvency Law (2005)
A. Keay, P. Walton and S. Griffin: Insolvency Law: Corporate and Personal (2nd Edn. 2008)

Preliminary reading

Roy Goode: Principles of Corporate Insolvency Law, (4th Edn, 2011), Chapters 1-3.
I.F. Fletcher: The Law of Insolvency (4th Edn. 2009, with Supplement 2011), Chapters 1, 2 and 17.

Other information

None specified, but students will find it advantageous to have a knowledge of the law of companies (not necessarily based on the laws of the UK). Those who do not have any previous knowledge of insolvency law will also find this module a useful foundation for the study of course GO91, Corporate Insolvency II: Financial Restructuring. The two modules are in many ways complementary to each other, and are conveniently timetabled in the same period of the teaching week, in Term 1 and Term 2 respectively.

Prizes for this module

Dissertations written in relation to this course are eligible for consideration for the award of the International Corporate Rescue Prize for Excellence.

The application process for the 2013-14 academic session is open.
The deadline for applications to be received has been extended to Monday 1 July 2013

Please refer to the How to apply section for information on the application process.