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Selected Works

Riz Mokal

Bankruptcy Law

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Full-Text Articles in Law

Liquidity, Systemic Risk, And The Bankruptcy Treatment Of Financial Contracts, Riz Mokal Dec 2014

Liquidity, Systemic Risk, And The Bankruptcy Treatment Of Financial Contracts, Riz Mokal

Riz Mokal

Parties to repos, and to swaps and other derivatives are accorded privileged treatment under the bankruptcy laws of several dozen countries. Several key international “best practice” standards urge legislators in other jurisdictions to provide likewise. The beneficiaries of these privileges are solvent counterparties enabled, unimpeded by bankruptcy moratoria, to implement close-out netting arrangements and to dispose of collateral. The purported rationale is mitigation of systemic risk.
Taking a broad international perspective, this Article explores the “domino” contagion view of distress that motivates the privileges. This view derives from the outdated “microprudential” understanding of systemic risk, and is theoretically flawed and …

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An Agency Cost Analysis Of The Wrongful Trading Provisions: Redistribution, Perverse Incentives, And The Creditors’ Bargain, Riz Mokal Dec 1999

An Agency Cost Analysis Of The Wrongful Trading Provisions: Redistribution, Perverse Incentives, And The Creditors’ Bargain, Riz Mokal

Riz Mokal

This paper argues that the UK's wrongful trading provisions, enshrined in section 214 of the Insolvency Act 1986, are meant to ensure that hopelessly troubled companies enter the insolvency forum at the optimal time. This forum enables -- and forces -- those interested in the company's undertaking to forego aggressive and value-destroying individual action. Put differently, one of the functions of the collective insolvency regime is to minimise the co-ordination costs of the creditors of a firm threatened with insolvency. Section 214 is a tool enabling the regime to take over when these costs would be most acute. The existence …

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