Monday, July 13, 2009

Corporate Resurrection

Last week saw the resurrection of a dead company: General Motors. This was possible through a quintessentially American innovation: Chapter 11 Bankruptcy. Chapter 11 is the "Reorganization Under the Bankruptcy Code" chapter of the United States Bankruptcy Code. (The United States Code refers to the categorised, consolidated and codified general and permanent laws of the United States.) There is another form of corporate bankruptcy, Chapter 7 Bankruptcy, that deals with "Chapter 7. Liquidation Under the Bankruptcy Code". Although other countries have similar legislation to Chapter 11, for example Insolvency laws in the United Kingdom, there are several aspects of Chapter 11 that make it unique. For instance, under Chapter 11, typically the current management is allowed to continue running the business, whereas under British Insolvency laws the business is "put under administration" and is run by an outsider.

Failure, it appears, in the United States is an option. And a very good thing that is too. In Silicon Valley, a corporate failure or two is regarded as a badge of honour. This is something the rest of the world should learn from the United States: Failure does not have to be the end, it can be a second chance and a new beginning.

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