Publication Type

Journal Article

Version

publishedVersion

Publication Date

8-2021

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.

Keywords

Directors’ duties, zone of insolvency, shareholder opportunism, creditor protection

Discipline

Business Organizations Law | Commercial Law

Research Areas

Corporate, Finance and Securities Law

Publication

Journal of Corporate Law Studies

Volume

21

Issue

2

First Page

365

Last Page

395

ISSN

1473-5970

Identifier

10.1080/14735970.2021.1943934

Publisher

Taylor & Francis

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1080/14735970.2021.1943934

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