Micro- and small enterprises (MSEs) represent the majority of businesses in most countries around the world. Despite the economic relevance of MSEs, most jurisdictions do not provide a suitable insolvency framework for MSEs. This chapter starts by analyzing the particular features of MSEs as well as the need to provide them with a simplified insolvency framework. It then discusses the solutions and policy recommendations that the academic literature and various international organizations have suggested for the design of a simplified insolvency regime for MSEs. This chapter concludes by proposing several pillars for the design of an efficient insolvency framework for MSEs in the context of emerging economies.

This chapter examines the market and institutional environments existing in emerging economies. Therefore, it provides the basis for the understanding of the insolvency framework for emerging economies suggested in this book. Despite the divergences existing across jurisdictions, this chapter shows that most emerging economies share some common features, including the existence of an institutional environment that generally comprises an inefficient judicial system, high levels of corruption, low levels of protection of property rights, and a weak rule of law. Other features commonly found in emerging economies include the existence of underdeveloped financial systems and the prevalence of micro- and small enterprises and large controlled firms. This chapter concludes by highlighting the fact that some features generally existing in emerging economies are also found in many advanced economies. Therefore, it will be argued that various policy recommendations suggested for the improvement of insolvency law in emerging economies can also be suitable for advanced economies.

This chapter starts by explaining that, when a company becomes factually insolvent but it is not yet subject to a formal insolvency proceeding, the shareholders – or the directors acting on their behalf – may engage, even in good faith, in various forms of behavior that can divert or destroy value at the expense of the creditors. For this reason, most jurisdictions around the world respond with a variety of strategies, including the imposition of special directors’ duties in the zone of insolvency. This chapter identifies six regulatory models for the design of directors’ duties in the zone of insolvency. After examining the advantages and weaknesses of each regulatory model, this chapter emphasizes that the desirability of a particular approach depends on a variety of country-specific and firm-specific factors. It concludes by suggesting various policy recommendations for the design of directors’ duties in the zone of insolvency in emerging economies.