The right of a creditor who is owed a liquidated debt that is not subject to a bona fide and substantial dispute to have the debtor company wound up if that debt is not paid in accordance with its terms is fundamental to the proper functioning of any modern financial system.

The existence (or absence) of an efficient creditor-driven winding up regime can have a marked impact on the way in which stakeholders (whether creditors or investors) assess investment opportunities, including on the decisions as to which form of structure to use, the type of investment they elect to effect, and the protections they seek to build into their investment agreements.

A creditor-driven winding up regime, and the associated consequences of a winding up application being filed, and/or a winding up order being made, also materially influences the way in which directors and / or controlling shareholders conduct themselves in periods of financial stress or distress.

Click to view article