The insolvency code and the creditor experience

Insolvency law is where a legal system is tested honestly, because it decides who loses money when there is not enough to go round, and everyone involved has a strong incentive to litigate.

What the code changed

Defined timelines for each stage, replacing procedures that could run for years without a decision. A case that never ends is functionally a case the creditor lost.

Stronger creditor participation, with committees able to influence the process rather than watching it.

Electronic auctions for the sale of assets, published and open, which is the single change that most affects how much creditors actually recover. A closed sale to a known buyer at a low price was the classic mechanism for making value disappear.

And, for the first time, a personal insolvency procedure, which matters for households carrying foreign currency mortgage debt.

What a supplier should still expect

That the process takes longer than the code implies, that secured creditors do considerably better than unsecured ones, and that recovery rates for unsecured trade creditors are low — as they are in most jurisdictions.

The practical advice

Insolvency is the wrong place to start protecting a receivable. Security, prepayment, credit limits and paying attention to a customer's payment behaviour are worth more than any recovery procedure.

What still lags

Enforcement of the judgment once obtained, and the quality of insolvency practitioners. A good code administered badly produces the same outcome as a bad code.

As a supplier chasing an unpaid invoice my only question has always been when the process ends. The code made ending possible — but enforcement still lags, which is why my practical advice has not changed: secure the receivable before it reaches litigation. A court is not a solution but the most expensive form of not having one.