By Dr Hamiisi J. Nsubuga
National legal systems have provisions that empower courts, especially, commercial courts to regulate matters related to business and commercial affairs, including insolvency related matters or disputes. These courts make strategic decisions, such as deciding whether a company faced with financial difficulties is worthy of a chance to restructure its debts/capital structures as opposed to being liquidated. However, the role of the court in this context is often either misunderstood or underestimated due to divergent theoretical perspectives on the role that they ought to play in an insolvency setting. In this short blog, I explore how involved should a court be in balancing stakeholder interests in insolvency and debt restructuring proceedings, especially in African emerging economies?
Debates on the role of the court in insolvency settings are dominated by theoretical ideals advanced by two leading insolvency theoretical schools; the traditionalists and proceduralists. These ideals further transcend to other theoretical movements, such as the contractarianism, and communitarianism in informing how such theoretical ideals may influence the role and/or approaches of the courts in balancing stakeholder interests in insolvency and debt restructuring frameworks. This is because, a theory is a factual concept or framework describing a given phenomenon, the way it is, or it ought to. Hence, insolvency law theories provide the basis upon which substantive insolvency laws and policies in different jurisdictions are prescribed or evaluated.