German insolvency policy - rescue not state injection

06 MAR 2009

The BBC and the Financial Times are reporting today that Mr Wolfgang Schaeuble, Germany's interior minister, has stated that modern insolvency law was, "not set up for the destruction but for the preservation of economic assets"

The BBC go on to report that, "insolvency was a better option for Opel than relying on a state handout - and that such a move would not mean that it would have to go bust."

Schaeuble continued, "The public perception is that insolvency is associated with going bust or bankruptcy. But that is wrong. We must grasp that to survive such a crisis, modern insolvency rules are a better solution than the state taking a stake."

The ideas proposed by Mr Schaeuble echo the UK approach to corporate rescue as engendered in the Insolvency Act 1986 (as amended) and in particular the administration procedure and the company voluntary arrangement procedure. Recycling of corporations so that viable companies (not just the business) and their assets - which must include employees, is a long held and laudable aim which has existed since 1986 following the recommendations of the Cork Report in paragraph 198 of their far reaching contribution.

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