If a company collapses while having more liabilities than assets then that's fine. No one is being forced to extend any credit to them.
If a company collapses while having more liabilities than assets then that's fine. No one is being forced to extend any credit to them.
That's the American viewpoint, right of the strongest, sue if they wronged you. European systems typically have a different philosophy where the counterparties are more protected.
It's expressed in stronger consumer protection laws, but also these German things where you can't start a GmbH/LLC with zero capital and wish the counterparties good luck suing you if you never pay them.
You're missing the point. Strong or weak has nothing to do with it. If you want to be protected then don't do business with undercapitalized counterparties. Everyone can make their own decision on acceptable level of financial risk. It's stupid for governments to dictate this.
How do you know if your counterpart is undercapitalized, though?
It will make it harder for "worthy" companies to get loans and credit.
Is that why it's so hard to get capital, credit, loans, and investment in the USA?
Nah. Lenders are free to do whatever credit checks they like. Government doesn't need to get involved.