Small and State Funded: An Empirical Study of Liquidations in Scotland - Inside Story Article

There is a significant degree of uniformity between corporate insolvency law in Scotland and in England and Wales, with many key elements reserved to the UK Parliament. The same types of corporate insolvency procedure exist in both systems, including liquidation in its various guises: members’ voluntary liquidation (MVL), creditors’ voluntary liquidation (CVL) and compulsory liquidation (winding up by the court). Nevertheless, there are differences in the relevant laws and insolvency practice. This is reflected in the fact that compulsory liquidations have historically been more commonplace in Scotland than CVLs, but the opposite is true for England and Wales. There are also differences in adjacent areas of law, such as the law of debt and the law of secured transactions, with these having an impact on insolvency outcomes.
Despite the contrasts between English law and Scots law and the availability of valuable data, there is a general absence of empirical analysis of corporate insolvency in Scotland. Consequently, the authors undertook a study to examine insolvent liquidations (i.e. CVLs and compulsory liquidations) for Scottish companies whose liquidations had their end point within a 12-month period. This enabled them to make a number of significant findings regarding the size of estates of liquidated companies, their lifespans and the duration of the liquidation procedures, as well as with respect to expenses, the role of state and the recoveries by various groups of creditors.