Reflections on Bankruptcy

It must be awful to become personally bankrupt. So awful in fact that it’s widely believed that potential investors must be afforded some protection against the risk. That lies behind the idea of the limited liability company.

Should you feel sorry for bankrupts like Westlife’s Shane Filan who is only one of many ‘celebrities’ who have suffered the same fate?

Entrepreneurs and business start-ups perhaps deserve the protection from personal ruin that bankruptcy offers. Otherwise they might never invest. In Britain, the law allows for you to pick yourself up and start again. In Ireland, the rules are much tougher (which is the main reason that Filan opted for bankruptcy in the UK courts rather than in Ireland). It’s sometimes said that in the US, being bankrupt is almost a badge of honour. Some entrepreneurs there have been bankrupted two or three times before they get their business formula right.

What do you think? If people get it badly wrong, should they be given a generous 2nd (or 3rd or 4th) chance? Or should people hoping for big rewards be better prepared to face the big risks this presents?

There’s a deeper question here about business failure. Could it actually be (sort of) good news when a business fails? See what Theo Paphitis from Dragons’ Den thinks.