Volume 42 | Number 3 Summer 2007
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II. Increase of Efficiency
Before describing this development, it might be appropriate to pause for a moment and to observe the factual and legal situation in the case of multiple insolvencies. What has been a more or less coherent economic unit7 becomes, so to speak, a pile of shards—each separate legal entity is subject to its own insolvency proceeding as the decision to open a proceeding for each entity is determined separate and independent of the others.8 The consequence is that there are many insolvency administrators to be appointed, many creditors’ assemblies and committees to be conducted, and many investigations to be initiated into potential pre-proceeding transactions of the debtor—to the detriment of the creditors as well as into potential violations of directors’ duties. This is only a brief overview of the activities to be initiated after the economic and legal breakdown of the group entities; it makes sufficiently clear that the real topic behind any considerations about the law of group insolvencies is the desire and need for greater efficiency. Like the parallel set of intricacies in the field of cross-border insolvency law where the universality principle is gaining more and more ground internationally due to its greater efficiency prospect, one should approach the intricacies of a group insolvency law, too, from the perspective of increased efficiency.
A closer look at this statement—as convincing as it might appear at first glance—reveals that there are some traps better avoided at the outset. One has to ask, namely, what is meant by “greater efficiency?” This question touches on the fact that not all insolvency laws in this world are premised on the same policy objectives. Thus, some laws declare it as their highest priority to achieve the best possible satisfaction of the creditors. Some say almost the contrary—namely to give the debtor the chance of a fresh start, or to foster entrepreneurialship in general. Still others view efficiency as preserving the work place, the integrity of the economic unit, or ensuring payment of certain creditors in that very state. Efficiency under these diverse circumstances thus comes to have different meanings, which must be kept in mind for possible solutions to the problem of group insolvencies. As a working hypothesis, I define efficiency in this text as asset maximization by preserving the debtor companies to the utmost while obtaining the best possible satisfaction of the creditors. I emphasize this hypothesis will be fine-tuned in the future, and should be treated as a hypothesis in its infant stage of development.