Distress dynamics: An efficiency assessment of Dutch bankruptcy law

Both in the Netherlands and the United States of America a change in the dynamics of bankruptcy procedures is taking place. In the Netherlands, the opening of a bankruptcy procedure (faillissement) traditionally leads to the sale of the assets of the debtor and a distribution of the proceeds among creditors. In recent years, however, there has been increased attention for reform of Dutch bankruptcy law as to enhance its reorganizational possibilities and enable the saving of viable businesses. In the United States a trend in the opposite direction can be seen. Bankruptcy law of this country has traditionally been known for its reorganizational possibilities, but in recent years there has been a marked increase in asset sales and efforts have been undertaken to limit the abilities to rescue any businesses. These changed dynamics warrant a fundamental discussion about bankruptcy law. Not every business in trouble should be liquidated, but not every business in trouble should be saved either. Rather, the challenge is to ensure that if a business enters bankruptcy, this bankruptcy leads to an efficient outcome by formulating the right rules. That is what this dissertation does. By establishing an assessment framework and assessing different bankruptcy procedures (asset sale, pre-pack and reorganization plans) the (in)efficiency of Dutch bankruptcy is laid out. In this respect, U.S. bankruptcy law is used as inspiration for solutions to inefficiencies.