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Chile: Increasing transparency in insolvency proceedings

Author: Andres F. Martinez
Publication: Celebrating Reform 2009
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Overview

Before 2005, the receiver profession in Chile was poorly regulated and vulnerable to corruption. Scandals challenged the public’s faith in the system. To root out corruption, Chile worked to ensure that private receivers were specially trained, licensed, appointed, and paid through a transparent system. In 2005, Chile enacted Law 20004, a modern amendment to its 23-year-old insolvency regulations. In its new law, Chile restored the public’s faith in its bankruptcy system. This case study tracks the process of effectively increasing transparency in insolvency proceedings and looks at the work that remains.

Main Findings

  • Law 20004 of 2005 put into place a better insolvency system. At the time of the case study, there had been no new corruption scandals since the enactment of Law 20004.
  • The improvements brought out by Law 20004 also promised to help speed up procedures, but it was still too soon to declare victory at the time of the case study.
  • In the last 4 years, there were no more than 150 bankruptcy cases per year in Chile, which was extremely low when compared to similar economies. Going forward, Chile should work to clear out its backlog of cases and expedite proceedings.