What are the legal obligations and responsibilities of company directors in relation to insolvency procedures? Comparison between the approaches in relation to the directors’ role in insolvency procedures in England and Wales and the US

Abstract

Insolvency laws and states’ approach to corporate rescue have often been regarded as fundamental elements for the achievement of a thriving economy. Financially distressed companies may overcome their insolvency and continue to operate and maximise the value of the company, the shareholders, the stakeholders, and ultimately bring a benefit to the economy as a whole. In that process, directors play essential role in helping the organisation navigate through the challenges of insolvency as their duties transform during the insolvency proceedings. Indeed, company directors are burdened with the heaviest responsibility during insolvency procedure, as they owe a fiduciary duty to the company’s shareholders and in some jurisdictions other stakeholders as well. The purpose of the dissertation is to provide a critical comparative review of the insolvency procedures in two jurisdictions with the aim to uncover the differences in directors’ duties. England and Wales and the United States were chosen for the work, as these States’ laws have largely been seen as offering best practices in relation to handling insolvency and promoting corporate rescue. This work has discovered substantial differences between the insolvency regimes in England and Wales and the United States. For example, the core objectives of the two regimes differ, as the former is more creditor-oriented, while the latter appears to be more debtor-friendly. In addition, the level of control that directors are allowed to keep under the examined insolvency regimes is also different, with the US regime being very lenient in terms of the amount of control that directors are permitted to retain. Through examination and comparison of the two regimes the present thesis intends to extract and present to the reader best practices in the field of insolvency/bankruptcy that may be used by countries that are undergoing legislative revision of current regimes or are currently setting up their insolvency frameworks.