Research on Directors’ Duty to Creditors upon Corporate Insolvency
Date Issued
2014
Date
2014
Author(s)
Lin, Szu-Pei
Abstract
This thesis focuses on directors’ duty to creditors upon corporate insolvency while attempting to discuss the issues of corporate governance and creditors’ protection when a firm is in distress. Based on the research result of academic papers and court decisions in Taiwan, the thesis further explores these issues from an economical and comparative law perspective, in order to specify the relationship between directors, shareholders and creditors as well as reconsidering Taiwan’s legal systems providing directors’ duty to creditors upon corporate insolvency.
When a firm is not able to pay its debts as they become due in the usual course of business or a firm’s total assets are less than the sum of its total liabilities, the conflict between shareholders and creditors become acute. To amend the principle of limited liabilities and shareholder primacy theory, how to establish proper systems of creditors’ protection, such as directors’ duty to creditors upon corporate insolvency is viewed as an important subject.
In Chapter III, this thesis explores the legal systems providing directors’ duty to creditors in Taiwan’s Civil Code, Company Act and the draft of Insolvency Law. On account of respective corporation’s different financial circumstance and creditor’s heterogeneity, the thesis argues that directors’ duty of applying to the court for the declaration of bankruptcy suffers fatal theoretical and practical infirmities. Therefore, Article 35, Paragraph 2 of the Civil Code associated with that duty might be also in need of revision or removal.
Besides, the thesis argues that Article 23, Paragraph 2 of Taiwan’s Company Act providing directors’ duty to any other person should be defined as a type of tort liability and it might fill the gap which other statutes could not deal with. Moreover, when a firm has gone into insolvent liquidation, directors’ duty to compensate for the 20% of creditors’ right provided in Article 174 of the draft of Insolvency Law is believed to face theoretical defects in the definition, elements and the relationship with the Insolvency Law. Therefore, further study might be needed to legitimize this article.
In Chapter IV and V, the thesis reviews the development of related legal systems under comparative laws such as Japan, United Kingdom and United States. With respect to directors’ duty to any other person pursuant to Article 429, Paragraph 1 of Japan’s Companies Act, based on the extremely divergent points of view stated by Japanese academics and court decisions due to lack of specific article dealing with directors’ duty to creditors under Japan’s law, it is improper to apply Japan’s supreme court decision directly to the interpretation of Article 23, Paragraph 2 of Taiwan’s Company Act providing directors’ duty to any other person without further consideration.
Moreover, with respect to the wrongful trading of Britain’s Insolvency Act 1986, the thesis views it as a great model of paying respects to directors’ exercise of control and management as well as the protection of unsecured creditors. In addition, considering the acute conflict between stakeholders upon corporate insolvency from the perspective of economics such as homo economicus, the thesis contends that shareholder primacy theory is no longer prevalent and directors owe fiduciary duty to creditors who become residual claimants just as argued by the Delaware Court. Therefore, for imposing fiduciary duty to creditors on directors when a firm is insolvent and the feature of creditor’s heterogeneity, the thesis argues for the feasibility and legitimacy of derivative suit conducted by creditors provided in Taiwan’s Company Act.
Furthermore, in order to let derivative suit function well, the thesis also contends that creditors’ accessibility to a firm’s financial materials should be secured as well. By protecting creditors’ rights to acquire corporate business materials, directors’ duty to creditors could work effectively to protect creditors’ right upon corporate insolvency.
Subjects
強制聲請宣告破產制度
債務超過
支付不能
受任人義務
債權之異質性
剩餘財產請求權人
代位訴訟
SDGs
Type
thesis
File(s)![Thumbnail Image]()
Loading...
Name
ntu-103-R99a21111-1.pdf
Size
23.32 KB
Format
Adobe PDF
Checksum
(MD5):4d4ac0ecf3e325d135b9d9d24dc2a265