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Micro, Small, and Medium Enterprise InsolvencyA Modular Approach$
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Riz Mokal, Ronald Davis, Alberto Mazzoni, Irit Mevorach, Madam Justice Barbara Romaine, Janis Sarra, Ignacio Tirado, and Stephan Madaus

Print publication date: 2018

Print ISBN-13: 9780198799931

Published to Oxford Scholarship Online: November 2018

DOI: 10.1093/oso/9780198799931.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use.date: 28 January 2022

The MSME Insolvency Status Quo

The MSME Insolvency Status Quo

(p.13) 2 The MSME Insolvency Status Quo
Micro, Small, and Medium Enterprise Insolvency

Mokal et

Oxford University Press

This chapter examines specific challenges faced by MSMEs. These challenges arise from factors such as size, lack of available collateral, undiversified nature, and lack of suitable external governance mechanisms, all of which contribute to a high MSME failure rate. As such, it is crucial for insolvency regimes to be responsive to MSMEs’ particular requirements. The chapter then discusses the need for cost-effective insolvency regimes tailored to these requirements, and the problems inherent in the development of such regimes. Cost-effective insolvency proceedings can encourage non-viable distressed firms to exit the market and efficiently recycle their assets to new uses, provide viable distressed firms with the chance to reorganize their operations and liability in order to continue in business, provide higher returns to MSME creditors and thereby incentivize lending in this sector, and encourage greater entrepreneurial activity and new firm creation. Ultimately, an effective MSME insolvency regime can alleviate the downside risk of a venture, in turn increasing the number and variety of people pursuing entrepreneurial activities.

Keywords:   MSMEs, insolvency regimes, cost-effective insolvency regimes, entrepreneurial activity, MSME insolvency regime, international regulatory context, international tools

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