The Legislative Guide on Insolvency Law was prepared by the United Nations Commission on International Trade Law (UNCITRAL). The project arose from a proposal made to the Commission in 1999 that UNCITRAL should undertake further work on insolvency law, specifically corporate insolvency, to foster and encourage the adoption of effective national corporate insolvency regimes.

An exploratory meeting to consider the feasibility of such a project was held in December 1999. On the basis of the recommendation of that meeting, the Commission gave Working Group V (Insolvency Law) a mandate to prepare a comprehensive statement of key objectives and core features for a strong insolvency, debtor-creditor regime, including out-of-court restructuring, and a legislative guide containing flexible approaches to the implementation of such objectives and features, including a discussion of the alternative approaches possible and the perceived benefits and detriments of such approaches.

To seek input from the international insolvency community on the key objectives and the scope of the core features of an insolvency regime to be included in the Guide, an international colloquium, organized in conjunction with INSOL International and the International Bar Association, was held in December 2000.

The first draft of the legislative guide on insolvency law was considered by Working Group V in July 2001 and work developed through seven one-week sessions, the final meeting taking place in late March 2004.

The final negotiations on the draft legislative guide on insolvency law were held during the thirty-seventh session of UNCITRAL in New York from 14 to 21 June 2004 and the text was adopted by consensus on 25 June 2004 (see annex II). Subsequently, the General Assembly adopted resolution 59/40 of 2 December 2004 (see annex II) in which it expressed its appreciation to UNCITRAL for completing and adopting the Legislative Guide.

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Introduction

A. Organization and scope of the Legislative Guide

1. The purpose of the Legislative Guide on Insolvency Law is to assist the establishment of an efficient and effective legal framework to address the financial difficulty of debtors. It is intended to be used as a reference by national authorities and legislative bodies when preparing new laws and regulations or reviewing the adequacy of existing laws and regulations. The advice provided in the Guide aims at achieving a balance between the need to address the debtor’s financial difficulty as quickly and efficiently as possible and the interests of the various parties directly concerned with that financial difficulty, principally creditors and other parties with a stake in the debtor’s business, as well as with public policy concerns.

The Guide discusses issues central to the design of an effective and efficient insolvency law, which, despite numerous differences in policy and legislative treatment, are recognized in many legal systems. It focuses on insolvency proceedings commenced under the insolvency law and conducted in accordance with that law, with an emphasis on reorganization, against a debtor, whether a legal or natural person, that is engaged in economic activity. Issues specific to the insolvency of individuals not so engaged, such as consumers, are not addressed.

2. The Legislative Guide also discusses the increasing use and importance of other tools for addressing insolvency, specifically restructuring negotiations entered into voluntarily between a debtor and its key creditors, which are not regulated by the insolvency law. In addition to addressing the requirements of domestic insolvency laws, the Guide includes the text and Guide to Enactment of the UNCITRAL Model Law on Cross-Border Insolvency (the “UNCITRAL Model Law”) (annex III) to facilitate consideration of cross-border insolvency issues. It should be noted, however, that a model law generally would be used differently to a legislative guide. Specifically, a model law is a legislative text recommended to States for enactment as part of national law, with or without modification.

As such, model laws generally propose a comprehensive set of legislative solutions to address a particular topic and the language employed supports direct incorporation of the provisions of the model law into a national law. The focus of a legislative guide, on the other hand, is upon providing guidance to legislators and other users and for that reason guides generally include a substantial commentary discussing and analysing relevant issues. It is not intended that the recommendations of a legislative guide be enacted as part of national law as such. Rather, they outline the core issues that it would be desirable to address in that law, with some recommendations providing specific guidance on how certain legislative provisions might be drafted.

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The United Nations Commission on International Trade Law (UNCITRAL) is a subsidiary body of the General Assembly. It prepares international legislative texts for use by States in modernizing commercial law and non-legislative texts for use by commercial parties in negotiating transactions.

Legislative texts include the following: United Nations Convention on Contracts for the International Sale of Goods; Convention on the Limitation Period in the International Sale of Goods; UNCITRAL Model Law on International Commercial Arbitration; UNCITRAL Model Law on Procurement of Goods, Construction and Services; United Nations Convention on Independent Guarantees and Stand-by Letters of Credit; UNCITRAL Model Law on International Credit Transfers; United Nations Convention on International Bills of Exchange and International Promissory Notes; United Nations Convention on the Carriage of Goods by Sea, 1978 (Hamburg); United Nations Convention on the Liability of Operators of Transport Terminals in International Trade; and UNCITRAL Model Law on Electronic Commerce.

Non-legislative texts include the following: UNCITRAL Arbitration Rules; UNCITRAL Conciliation Rules; UNCITRAL Notes on Organizing Arbitral Proceedings; UNCITRAL Legal Guide on Drawing Up International Contracts for the Construction of Industrial Works; and UNCITRAL Legal Guide on International Countertrade Transactions.

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