Keay, A. and Lombard, S. (2024) Financial distressed companies and directors’ obligation to consider creditors’ interests: An Anglo-Australian comparison of the obligation's trigger and application. Common Law World Review, 53 (3). 107 -131. ISSN 1473-7795
Abstract
Many common law jurisdictions recognise that directors have an obligation to consider the interests of company creditors when the company is experiencing financial distress. Despite numerous cases attempting to crystalise legal principles related to this obligation and significant academic commentary on the topic, the parameters of the obligation remain uncertain. This paper provides an analytical comparison of the latest case law in Australia and the UK concerning the two most important issues that exist in relation to this obligation, namely when is the obligation triggered and what do directors have to do to ensure that they comply with the obligation. We found that the UK courts appear to be adopting a much more restrictive approach regarding the trigger for the obligation, whereas the obligation may arise much earlier in Australia, due to the liberal framing of the trigger. An analysis of case law also revealed that the weight attached to the interests of creditors once the obligation is triggered seems to be much more significant in the UK, compared to Australia. This analysis is important as there is no doubt that courts in other common law jurisdictions, and particularly in the Commonwealth, will examine the Australian and UK jurisprudence in making their decisions in relation to any claim that directors have failed to comply with the obligation to consider the interests of creditors.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © The Author(s) 2024. This article is distributed under the terms of the Creative Commons Attribution 4.0 License (https://creativecommons.org/licenses/by/4.0/) which permits any use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access page (https://us.sagepub.com/en-us/nam/open-access-at-sage). |
Keywords: | directors’ duties; directors’ obligations; directors’ duty to creditors; creditor interests; duty to creditors |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Education, Social Sciences and Law (Leeds) > School of Law (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 09 Feb 2024 14:41 |
Last Modified: | 10 Dec 2024 09:45 |
Status: | Published |
Publisher: | Sage |
Identification Number: | 10.1177/14737795241231987 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:208838 |