This article studies a previously unknown asset market in eighteenth-century Sweden. It emerged as a result of a partial default in 1719, when large amounts of recently released fiat coins were converted into government liabilities. These could only be redeemed as a customs duty on international trade, the licent. As merchants had to acquire such assets to conduct their trade, tens of thousands of transactions were carried out on a secondary market over a period of more than 45 years. Networks of local merchants bought assets from initial holders and sold them on to intermediaries or merchants, who deposited the liabilities with a newly established government agency, the Debt Office. Here, hundreds of account holders could transfer the value of their deposits between them. When a licent payment was due, the amount was deducted from the merchant's account. Prices on the liabilities were low and sometimes volatile, but the long-term trend was rising. We have distinguished three types of market participants: a small group of very active users, most of them professional dealers or brokers; merchants who traded on a regular basis as they needed to pay the licent, or when a favorable opportunity appeared; and finally, those who traded sporadically. The emergence of this market was part of a financial expansion that occurred in many European countries at the same time, the closest equivalent being the segmented default in France after the abolition of John Law's system. This study aims to broaden our understanding of eighteenth-century financial developments, which have rarely been studied in a semi-peripheral European economy.

Warren Buffett famously commented that the U.S. airline industry had made zero profit in its first nine decades. Subsequently, between the millennium and the Great Financial Crisis the airlines in total lost almost $60 billion. Yet no major airline was liquidated or taken over in those nine years. Financial support was repeatedly provided by GE, the conglomerate supplier of leasing finance, engines, and servicing. The article offers a historical perspective on the factors behind this relationship between GE and airlines. It outlines the benefits or costs to GE, airline shareholders, and passengers; the relevance of the model for other industries; and implications for different notions of efficiency.

Until recently, Zimbabwean insolvency law was unconcerned with rights of employees on insolvency of the employer. The new Insolvency Act points in a different direction. It guarantees limited rights of workers in their capacity as creditors and as employees. There is a convergence of insolvency law and labour law. These are legal disciplines with contradictory philosophies. This contribution analyses the rights of employees on insolvency in Zimbabwe. The review is informed by international best practices. The article establishes that Zimbabwe follows the “model two: bankruptcy preference approach”. It brings to the fore fundamental weaknesses inherent with this approach in the Zimbabwean context. The article argues that the protection of employees’ rights on insolvency can be enhanced if Zimbabwe follows the “pro-employee approach” and the “bankruptcy priority-guarantee fund approach”. It concludes by advocating for the alignment of the Insolvency Act with international best practices, the constitution and labour legislation.

Conventional economic reasoning suggests that formal insolvency proceedings should commence once the greater of the going concern value or the liquidation value of a firm falls below the value of its liabilities. Since this test is difficult to apply in practice, an additional cash flow test is needed: formal insolvency proceedings should commence if a firm is not able to pay its due debts. Two factors complicate this analysis: risk-shifting incentives of shareholders/managers in the vicinity of insolvency and the (rapid) decline of a firm's going concern value once it approaches insolvency. The former problem should be addressed by a liability rule for wrongful trading. Based on a review of the current legal position in the United States, the United Kingdom and Germany, a uniform European rule is proposed that imposes liability on managers of insolvent companies for trading while they knew or should have known that insolvency was more probable than not, unless they can show that they took all reasonable steps to avoid insolvency. The decline of a firm's going concern value once it approaches insolvency provides all stakeholders with an incentive to try a workout to save as much of the going concern value as possible. However, workouts often fail in practice due to free-rider effects. Cooperation duties are proposed as a means to support workouts. Such duties should be triggered once a workout is initiated. It is suggested that bankruptcy rules, in general, and rules on the initiation of bankruptcy proceedings, in particular, should in principle be enabling rather than mandatory.

While the corporate bankruptcy regime of the United States provides for a so-called debtor-oriented regime, many European corporate bankruptcy regimes could hitherto be labelled as creditor-oriented. Yet bankruptcy reform in Europe generally emphasizes the need for introducing schemes that facilitate business rescue, which has already led several European countries to add reorganization mechanisms to their bankruptcy laws. Surprisingly, on both sides of the Atlantic, policy makers pay little attention to corporate bankruptcy as a corporate governance mechanism. This paper argues that the comparative efficiency of corporate bankruptcy regimes cannot be considered separately from the governance structures of firms that make use of the bankruptcy laws. To evidence this, the paper analyzes two types of governance structure, namely that of the small and medium-sized firm with a concentrated secured bank lender and that of the publicly held firm with a dispersed ownership structure. This account gives rise to a reformulation of the trade-offs made by debtor- and creditor-oriented regimes and suggests that different optimal regimes may exist for different types of firms.

This note sets out some preliminary ideas on the potential impact of the Enterprise Act 2002 on the bargaining strategy of secured lenders. Such strategy will be designed to limit the adverse impact of the Act on the erosion of secured lenders' enforcement rights. Sophisticated parties will bargain in the shadow of the law and, if accorded the necessary freedom, will bargain around it.

This paper surveys the main effects of recent legislative changes to the corporate insolvency law of the United Kingdom, from the standpoint of their potential impact upon corporate rescue. The reforms, enacted in 2000 and 2002 and brought into force during 2003, have recast the law relating to company voluntary arrangements, administrations, and administrative receiverships. After considering the various deficiencies in the pre-existing law, which rendered each of these procedures in varying ways unsatisfactory for the purpose of addressing the problems of financially troubled companies, the paper examines the process by which the declared intentions of the government when introducing its reforming legislation were significantly altered during the course of enactment into law. While the outcome of this dialectical drama has been the bringing about of some worthwhile improvements in the refashioned administration procedure, this has been accompanied by a significant dilution of the government's previously stated intentions with respect to the attenuation of the rights and powers of creditors holding security in the form of a floating charge. Consequently, the paper concludes that administrative receivership will retain a far greater practical significance than had been previously envisaged, while the opportunities made available to floating charge holders under the revised administration procedure provide a strong incentive for institutional lenders to continue to make use of this species of security. The author concludes that UK insolvency law has been unable to embrace the ‘American way’ of corporate rescue, with debtor-in-possession as its core principle, but has instead opted for a ‘rescue’ model in which creditor interests continue to assert a dominant influence.