Leiden researchers and SEO Economisch Onderzoek examine financing insolvency administrators
Leiden researchers from the departments Company Law and Business Studies will be collaborating with SEO Economisch Onderzoek on behalf of the WODC. The subject of their research project will be the financing of the insolvency administrator.
Per definition, insolvencies mean a lack of financial resources. For each insolvency, an average debt of 582,000 euros remains, of which approximately 109,000 euros in outstanding tax and social security contributions. The average recovery rate - the percentage of debts of the joint debtors that is eventually paid - is only 4.8 percent per insolvency. The average recovery rate has been declining for years. Recent empirical research has shown that, according to insolvency administrators, in over 70 percent of the bankruptcies estate creditors only receive partial payment and in 37 percent of the bankruptcies they do not get paid at all.
A logical consequence of this ‘empty estate issue’ in combination with the way in which financing of insolvency administrators is organised in the Netherlands, is that insolvency administrators do not receive a salary, or only a partial salary, in the case of insufficient funds in the estate. According to insolvency administrators, they need to deduct a third of the hours they work in insolvencies because of insufficient funding from the estate to cover those hours. Because of a lack of funds in the estate, they are unable to perform certain tasks.
Although it is clear that the financing of insolvency administrators is compromised by the empty estate difficulties, it remains unclear what the precise extent of the problem is and what the consequences of a lack of financing are for the insolvency settlements. It remains unclear which tasks remain undone depending on the size of the estate and in how many insolvencies financing of the insolvency administrator is inadequate for them to perform their tasks. Research into the extent of the problem is a prerequisite to be able to develop proposals for alternative means of financing to solve the financing problem for administrators.
Researchers from the Departments Company Law and Business Studies of Leiden University in collaboration with SEO Economisch Onderzoek in Amsterdam, will set up a research project. They will investigate the extent of the financing problems regarding administrators in insolvencies and subsequently come up with proposals for alternative means of financing. Reinout Vriesendorp, Harold Koster, Peter van der Zwan, and Jessie Pool will take part in the project on behalf of Leiden University. Contact via: firstname.lastname@example.org.