Corporate Failure Maxwell Communications

In Britain rates of insolvency have risen to historic highs, punctuated quite dramatically by company failures from Rolls Royce through the Olympia and York failure (the developers of London’s Docklands), and the collapse of the Maxwell communications empire. Because struggling debtor corporations frequently raid their pension funds for cash, which consequently are under-funded when companies declare bankruptcy, significant private costs have been off-loaded onto the government. Furthermore, failing firms do not pay their taxes, and so the tax authorities frequently join the list of unpaid creditors (Altman2003).
Yet bankruptcy is not without its beneficiaries. Just as a deadly epidemic is lucrative for undertakers and morticians, the vast sums of money involved in the largest corporate bankruptcies have exerted a magnetic effect on the most sophisticated–and expensive–corporate lawyers and accountants. …
accounting, in both the United States and Britain, have become prestigious revenue-centres for law and accounting firms, so much so that in the United States there is increasing pressure to pare down the size of professional fees. During the 1980s, several of the largest accounting firms in Britain merged with small boutique insolvency firms, such as Cork Gully’s assimilation by Coopers and Lybrand, just as numbers of large United States law firms absorbed smaller bankruptcy specialist firms simply in order to acquire their expertise in a quickly growing area (Altman2003).
the case of Maxwell shows that despite the far-reaching practical implications of such legal change, bankruptcy law opens up an almost virgin field of inquiry for socio-legal scholars and sociologists. Given the enormous impact bankruptcy reforms are alleged to have, little research has appraised what or who shaped the bankruptcy laws in either country. Empirical studies document the aftermath and apparent consequentiality of the reforms. Bankruptcy law provides an especially valuable site to account for the distribution of power among corporations for two reasons. On the one hand, at the moment of bankruptcy, every credit relationship, which is to say every financial relationship with other companies, banks, the state, consumers, suppliers, workers, and even communities, is simultaneously thrown into doubt. In principle, every player in the organizational network is at the bankruptcy table. All their interests are manifest, as each vies for a piece of a pie that will be too small to satisfy them all. On the other hand, who wins is directly contingent upon statutory priority or on the strength of their security–the legal instruments creditors have used to protect their interests. This conjunctionbetween property rights, fixed by legal securities, and flows of credit, presents a quite distinct portrait of the distribution of power in the corporate field (Barzel 2005).