Vol 14 (2017) - Issue 3

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Insolvency Reform in Developing Countries: Corporate Rescue to the Rescue?

Introduction
Corporate rescue has attracted an increasing global interest during the last two decades. Incorporation of a corporate rescue framework into domestic insolvency law makes it easier to effectively rehabilitate ailing, but viable, businesses. Therefore, many countries throughout the world have updated their insolvency regulation to include such a framework, or are in the process of developing such frameworks. Where it comes to insolvency reform, it is not surprising that countries look at each other’s experiences with corporate rescue. After all, it is possible to learn from the experiences of other countries and develop a better, more efficient corporate rescue system without having to reinvent the wheel. Developing countries, however, sometimes take this a bit further. In order to achieve a better functioning market economy they sometimes import complete concepts of insolvency law from other countries: so-called legal transplanting.
The insolvency reform trend is fuelled by the international community. Many countries and international organisations have been involved in reform efforts by providing Model Laws, General Principles, and the likes. Further, in certain cases, financial assistance is conditional upon insolvency reform. Although the assistance provided to developing countries might seem altruistic, it also serves the interest of the rich(er) countries. Indeed, a stable insolvency framework improves the investment climate, thereby making it possible to get better returns on investments.
This article aims to investigate the influence of mature insolvency systems on the development of corporate rescue regimes in developing countries, thereby assessing the possibility of transplanting existing corporate rescue measures. To this end, the article is divided in three sections. The first section will provide for a theoretical framework. The second section discusses the development of corporate rescue regimes. The last section will critically assess the possibility of legal transplantation and its effect on developing countries. Finally, a conclusion will be given.