Ignorance is not bliss: Directors, insolvency literacy and the rescue gap

Abstract Corporate rescue has become a central policy goal in modern insolvency law. Across jurisdictions, legislators and international organisations have invested heavily in restructuring frameworks intended to facilitate early intervention and preserve viable businesses. Yet, despite sustained reform effort, the practical use of rescue procedures remains consistently low. Explanations typically focus on structural barriers such as cost, procedural complexity and creditor dynamics. This paper argues that these accounts overlook a more fundamental constraint: company directors' understanding of insolvency law. Most insolvency regimes place directors at the centre of the rescue process, expecting them to recognise financial distress, appreciate shifting legal duties and initiate appropriate procedures. The effectiveness of rescue frameworks, therefore, depends implicitly but critically on directors possessing sufficient familiarity with insolvency concepts, options and consequences. Where insolvency law is poorly understood, weakly signposted or encountered only at a late stage, formal rescue mechanisms may exist but remain unused in practice. Drawing on comparative institutional insights and two case studies, the paper demonstrates how differences in director‐facing visibility, professional mediation and institutional support shape the accessibility of rescue regimes. Ireland's Small Company Administrative Rescue Process illustrates how even well‐designed procedures may struggle to gain traction when knowledge diffusion among directors and first‐line advisers is limited. By contrast, the United States' Subchapter V shows how procedural simplification can be effective when embedded within a broader ecosystem that actively produces, disseminates and normalises insolvency knowledge. The paper concludes that insolvency reform must move beyond statutory engineering to address the conditions under which directors encounter and interpret insolvency law. Without attention to legal literacy, professional pathways and institutional signalling, the promise of a rescue culture will remain an illusion.