CHAPTER 1 - INTRODUCTION

1.1       SCOPE AND LAYOUT OF THIS BOOK

 This book is designed to give creditors a guide to their rights under legislation affecting insolvent companies and individuals. It also presents some practical tactics that creditors may employ in asserting their rights.

 By and large the book focuses on those rights that come into play immediately after a compulsory insolvency administration or a voluntary insolvency procedure begins. For example, it does not discuss the rights of a creditor to apply to the court for a winding up or bankruptcy order against a debtor. Rather, it traces and describes the rights that are bestowed upon creditors when such orders are made or, in the case of voluntary procedures, when a debtor initiates such a procedure.

 A great deal of care has been taken to ensure that the contents of this book are accurate. It differs, however, from the typical academic or scientific study of law in that it contains more than the usual number of generalisations and rarely directs the reader to decided cases. Both these characteristics of the book exist for good reasons. Primarily, the book is a guide to insolvency law [and practice] for the layman, not a scholastic treatise for the expert. It is also designed to be easy to read, an attribute that is hindered by frequent interruptions for footnotes and the like. The reader who wants more detailed advice on any of the matters discussed in this book should consult an accountant or lawyer who specialises in this field.

 No attempt has been made to look at all aspects of insolvency law. Rather, the book is confined to those that are relevant to creditors. In essence, the book plucks out and presents those parts of the insolvency laws that confer rights and powers upon creditors.

 Nevertheless, in chapter 2 a rough sketch of the whole scene is presented to mark out those areas occupied by the various laws, persons and institutions that make up the system of insolvency administration. That chapter also explains some of the words and phrases that are used frequently throughout the book.

 The book focuses on the insolvency laws relating to companies and individuals, because these legal entities are by far the most common encountered by creditors. But again, to provide a broad view of the insolvency arena, chapter 3 contains an outline of the insolvency laws covering partnerships, trusts and some of the other forms of business organisation. Because some of these areas are not discussed elsewhere in the book they are given more space in chapter 3 than could otherwise be justified.

 The emphasis in this book is on the rights of unsecured creditors rather than the rights of secured creditors. One reason for this is the fact that as a rule secured creditors are aware of their rights. Also, secured creditors, because of the power they derive from their securities, are generally less reliant upon, and hence less interested in, powers bestowed by statute. 

It is hoped that this book will encourage ordinary creditors to play an active role in insolvency administrations.

1.2       HOW TO USE THIS BOOK

 

 Chapter 2 gives a brief, panoramic view of insolvency law and administration. Chapter 3 goes into more detail about selected aspects of the scheme. Together they provide an overview

of how the insolvency system operates and where the rights of creditors lie.

                

 In chapters 4 to 11 each type of insolvency administration is explained in a chapter of its own. The reader who already understands the insolvency system and laws may safely pass over chapters 2 and 3 and go, via the table of contents, to the chapter on the type of administration he or she is particularly interested in. Readers who are less familiar with insolvency laws may also kip chapters 2 and 3, although they might find subsequent chapters difficult to fully comprehend. In either case the reader should refer to the glossary of terms at the beginning of this book whenever he or she encounters an unfamiliar word or phrase.

 

 Chapter 12 discusses and elaborates on some special subjects and issues touched on throughout the book.

 

 The book contains two features designed to help creditors assert their rights and take an active role in insolvency administrations. One is a number of pro forma or sample letters and forms. These are linked to the text, so that should the creditor decide to follow a certain course of action the pro forma or sample can be utilised. The second feature is a chapter [13] explaining those statutory forms that creditors often have difficulty understanding.

 

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