Tag: Insolvency

Financial Mindmap: videos explaining corporate finance

In 2024, the paperback version of “Corporate Finance for Lawyers” was published. In this book, the authors explore the intricate relation between law and corporate finance to allow lawyers to gain a deeper understanding of the field they are working in.

First of all, the book provides an introduction into the basic building blocks of the world of corporate finance and the dominant company valuation methods of EBITDA-multiples and Discounted Cash flow methods. The book further explains standard finance patterns from both a finance and a legal perspective, most notably the increased use of non-interest bearing debt as cheap way of finance, financing by means of secured credit, financing by means of shareholder loans and financing by means of guarantees. The book also discusses the corporate finance dynamics of reorganization procedures and disputes over the allocation of value as part thereof. The authors focus on what goes on in the actual world of corporate finance, discussing the power balance between shareholders, secured lenders and creditors in a world where the assumptions of perfectly functioning markets with fully adjusting creditors do not apply.

The authors use the Financial Mindmap throughout the book. This tool depicts finance by using colour and visualisations in a clear and intuitive manner. By using the Financial Mindmap, readers can quickly gain an intuitive understanding of finance.

The Financial Mindmap is developed as an interactive tool for teaching purposes. In order to bring the Financial Mindmap further to live, the authors have developed video’s explaining corporate finance. In addition to an Introduction to Corporate Finance for Lawyers, the authors discuss Solvency and insolvency as balance sheet concepts (video 1), The use of non-interest bearing debt as a cheap source of finance (video 2), Non-interest bearing debt and company valuation (video 3), and Secured credit for investing and distributions to shareholders (video 4).

The flip side of the coin: how entrepreneurship‑oriented insolvency laws can complicate access to debt financing for growth firms

Policymakers strive to create legislation that promotes entrepreneurship, as it influences individuals’ propensity to start new ventures. While research extensively covers the effects of tax and interest policies on entrepreneurship, the impact of insolvency laws remains underexplored in law and economics scholarship. In our paper entitled “The flip side of the coin: how entrepreneurship‑oriented insolvency laws can complicate access to debt financing for growth firms”, we examine the changes in the use of debt for growth firms, using the recent reform of Belgian insolvency and company law in the 2017-2019 period as an exogenous policy shock (e.g. easier access to debt remission for natural persons, the new rule for demarcation of the assets of the bankrupt estate from art. XX.110, §3 and the ‘cheaper’ form of limited liability due to the introduction of the BV without a legal [minimum] capital).

What research tells us, and doesn’t tell us 

Continue reading “The flip side of the coin: how entrepreneurship‑oriented insolvency laws can complicate access to debt financing for growth firms”

Corporate insolvency law – seen from a comparative perspective

A guestpost by Prof. Dr. Reinhard Bork (Universität Hamburg)

 

The financial shipwreck of a company is a customary event in nearly all states of the world. Most jurisdictions have special statutes addressing this topic and they are – beyond terminological issues – all dealing with the same questions: how is the term “insolvency” defined? How are insolvency proceedings commenced? What are the responsibilities of the court on the one hand and of the Insolvency Practitioner on the other hand? Are there various classes of creditors and what are their procedural and substantive rights? How is the insolvency estate determined? What are the effects of the opening of insolvency proceedings on the estate? What are the consequences for executory contracts or rights to set-off? Can transactions performed prior to the opening of insolvency proceedings be reversed to the benefit of the general body of creditors? What is the legal position of secured creditors? Is restructuring of an insolvent company a possible scenario and what are the differences between liquidation and restructuring proceedings? Which rules apply to cross-border affairs, e.g. to assets located in a foreign jurisdiction? Continue reading “Corporate insolvency law – seen from a comparative perspective”