Commercial Morality and Public Policy as 'Principles' of Corporate Insolvency Law
This article seeks to grapple with a number of basic principles of insolvency law which are applicable to attempts to manipulate such laws through such devices as so-called 'phoenix companies' and 'strategic insolvency'. That it is important to take a principled approach to corporate insolvency is clear, although this is not always evident from the ad hoc nature of the corporate insolvency law reform process. The need for a principled approach has been well illustrated by Professor R. M. Goode in his masterly text, Principles of Corporate Insolvency Law.1 In his Preface to that work, Goode noted that corporate insolvency law 'encompasses a wide range of complex, not to say controversial, policy issues which are only now beginning to receive in this country the attention they deserve'.
Goode's analysis is important for its effort to gain a perspective on corporate insolvency law, by focusing upon underlying principles and so seeking to avoid being overwhelmed by the minutiae of statutory provisions in this area. Professor Goode identifies ten principal 'objectives' of corporate insolvency law, such as the suspension of actions by individual creditors to pursue their own rights and remedies; the provision of a fair and equitable system for the ranking of claims, and the objective of seeking to avoid transfers and transactions which unfairly prejudice the general body of creditors.2 At times these objectives can be stated in terms of fundamental legal principles, such as the pari passu rule.
Goode goes on to identify ten basic 'principles' of corporate insolvency law, such as the principle that 'unsecured creditors rank pari passu'. He adds3 that the ' pari passu principle is one of the most fundamental principles of corporate insolvency law'.4 He states further that this 'principle is allpervasive. Its broad effect is to strike down all agreements which have as their object or result the unfair preference of a particular creditor by____________________