Corporate Insolvency Law Perspectives and Principles

This part of the book assesses the role of rescue procedures in insolvency. We begin by considering what rescue involves, the reasons why rescue may be worth attempting, the different routes to rescue and the UK's new focus on rescue and ever-earlier responses to corporate troubles. The chapter then considers how different countries’ rescue regimes can be compared.

What Is Rescue?

Rescue procedures involve going beyond the normal managerial responses to corporate troubles. They may operate through informal mechanisms as well as formal legal processes. It is useful, therefore, to see rescue as ‘a major intervention necessary to avert eventual failure of the company’. This allows the exceptional nature of rescue action to be captured and it takes on board both informal and formal rescue strategies.

Central to the notion of rescue is, accordingly, the idea that drastic remedial action is taken at a time of corporate crisis. The company, at such a point, may be in a state of distress or it may have entered a formal insolvency procedure. Whether or not a rescue can be deemed a success raises a further set of issues. Complete success might be thought to involve a restoration of the company to its former healthy state but in practice this scenario is unlikely. The drastic actions that rescue necessarily involves will almost inevitably entail changes in the management, financing, staffing or modus operandi of the company and there are likely to be winners and losers in this process. As Belcher observes: ‘All rescues can be seen as, in some sense, partial.’ This observation also serves to point out that a rescue may be ‘successful’ from the point of view of some parties (for example, shareholders or employees) but not from the perspective of others (for example, managers or creditors). Assessments of rescues may accordingly have to be qualified in order to reflect these different points of view.

It is worth stressing that the mere survival of a company in the wake of renegotiations does not necessarily indicate that a successful rescue has occurred.