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UNCITRAL: The Plight of Small Entrepreneurs: MSEs and Insolvency on the Agenda
The 54th session of Working Group V began in Vienna with the nomination of a new Chair, Harold Foo from Singapore. The objective of the session was to consider the problem of insolvency in relation to Micro- and Small-Enterprises (MSEs). Delegates to Working Group I on business law rules joined the insolvency experts in the room for four days of deliberations. The aim was to provide a model law to help govern the position of enterprises that constitute, in many developing and developed countries, 90-95% of all businesses operating in the economy. Recommendations on the principle of a simplified insolvency regime and its treatment of all business debts were readily adopted at the end of the four days’ work, though not without a great deal of scrutiny of the proposals. Overall, the right balance was sought between the UNCITRAL Legislative Guide framework and the simplified version that was to be recommended for adoption by UN member states.
A great number of issues arose that required a resolution through the consensus model that UNCITRAL operates. Delegates were asked to determine, inter alia, whether a debt repayment plan as a condition for discharge should be an adjunct to or an outcome of simplified proceedings and whether the overall framework should refer to “competent authorities” or just “courts”, with a view to being as embracing as possible with respect to the oversight authority for such proceedings. Other issues canvassed included whether there should be a cap on the number of times proceedings can be extended or instigated, avoiding the possibility of “repeat offenders”, whether the principle of a “discharge” should be framed negatively or positively, by being attainable at a reduced cost and with limited formalities (as the World Bank Principles also foresee) and whether, in particular, secured creditors should be immune from any stay provided in such proceedings.
In addition, concerns were raised over what information should debtors have to provide for proceedings to begin or continue and whether the opening of proceedings could be “automatic” on filing or needs to be subject to control by a competent authority. Whether clawback rules needed to be expressly mentioned was also a theme debated in the group. The context for these issues, in particular, was how to avoid fraudulent filings and how to prevent abuse of process. Lastly, touching on the situation of No Income No Asset cases, delegates were of the view that guidance had to be given as to what elements of a simplified regime would be appropriate for these problematic, but increasingly prevalent cases. As such, a number of delegations volunteered to provide technical assistance should any UN member states require help in transposing one or more of the series of Model Laws that have resulted from UNCITRAL’s work since 1997.

Report by: Florian Bruder, DLA Piper Munich and Paul Omar, Technical Research Coordinator, INSOL Europe.
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