Corporate group insolvencies: Charting the past, present and future of pooling arrangements
- Lawbook Co
- Publication Type:
- Journal Article
- Insolvency Law Journal, 2007, 15 (2), pp. 78 - 99
- Issue Date:
This article examines the problems associated with the collapse of corporate groups; in particular, the tension that arises during insolvency between the application of the separate legal entity principle and the common commercial practice of managing corporate groups as a single economic entity. Specific attention is given to the difficulties faced by insolvency administrators dealing with extensive (and often inadequately documented) intermingling of assets between corporate group members and creditor confusion concerning the precise identity of the debtor corporation. One solution to these problems has been the use of pooling arrangements, with a range of statutory powers currently being used by different courts to facilitate the consolidation, for liability purposes, of the assets of the pooled group companies. However, each of the current methods of pooling has at least some measure of judicial uncertainty, which has prompted the introduction of a statutory pooling regime. This article will discuss how the proposed new pooling powers will overcome the problems that have arisen under the current methods for implementing pooling arrangements and attempt to provide some guidance as to how these new powers may be interpreted by the judiciary.
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