Towards an optimal model of directors’ duties in the zone of insolvency: an economic and comparative approach

Abstract

When a company becomes factually insolvent but it is not yet subject to a formal insolvency proceeding, the shareholders -or the directors acting on their behalf -may engage, even in good faith, in various forms of behaviour that can divert or destroy value at the expense of the creditors. For this reason, many jurisdictions impose special directors' duties in the zone of insolvency. From a sample of more than 25 countries from North America, Europe, Latin America, Africa, Middle East, and the Asia-Pacific, this article seeks to explore the most common regulatory models of directors' duties in the zone of insolvency existing around the world. It concludes by providing various policy recommendations to design directors' duties in the zone of insolvency across jurisdictions taking into account international divergences in corporate ownership structures, debt structures, level of financial development, efficiency of insolvency proceedings, and sophistication of the judiciary.

Trade credit supply and financial distress outcomes: evidence from Australian voluntary administrations

“…This is an advantage because, compared to cash lending, trade credit is tied to inputs that can be traced and are not easily diverted by customers (Burkardt and Ellingsen, 2004). Other regulatory initiatives to constrain opportunistic behavior by customers prior to insolvency involve imposing special directors duties to creditors (Gurrea-Martínez, 2021).…”

Personal Liability in Bankruptcy: International Documents and the World Practice

“…Достатньо поширеним вирішенням проблем у разі наближення неспроможності і зменшує ризик настання вкрай негативних наслідків для компанії та заінтересованих осіб є практика законодавчого встановлення обов'язку директора звертатись до суду із заявою про порушення провадження у справі про банкрутство в разі появи визначених законом ознак неспроможності. Серед таких юрисдикцій є Австрія, Чехія, Франція, Німеччина, Люксембург, Польща, Португалія та Іспанія [13].…”