The Operation of the Insolvency System in the U.K.: Some Implications for Entrepreneurialism.

An inquiry of entrepreneurs in economic theory is followed by an overview of the insolvency system in the UK. The impact of the insolvency system upon entrepreneurs in the UK is then discussed. It is concluded that while there have been ostensible attempts at reforming insolvency law, these efforts have primarily benefited large firms. Moreover, it is maintained that the current operation of insolvency law remains principally geared toward the protection of creditors. As a consequence, small entrepreneurial firms have little or no alternative to liquidation, irrespective of the best interests of the company or its creditors. The entrepreneurial founders of these failed firms are then faced with potential disqualification and long-term, if not permanent, financial obstacle to continued entrepreneurship. It is proposed that the severity of the regime discourages the reentry of entrepreneurs into the market thereby depriving the UK economy of an experienced and potentially vital force for innovation. Copyright 1995 by Kluwer Academic Publishers