Directors Negotiating and Contracting in the Wake of Their Companies’ Financial Distress

The majority of commercial contracts around the world are negotiated and made by directors on behalf of their companies. Directors are subject to many obligations when they carry out these functions. This paper examines one of the most important ones, and that is the duty that directors owe when their company is in a state of financial distress. The duty owed is for directors to take into account the interests of their companies’ creditors at this time. The paper considers when directors are subject to this duty and what they must do when negotiating and contracting for their financially distressed companies, and considers some of the ramifications for directors and those who deal with them.