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UNCITRAL legislative guide on insolvency law, part four

Directors' obligations in the period approaching insolvency

image of UNCITRAL legislative guide on insolvency law, part four
This book focuses on the obligations regarding management of an enterprise when it faces imminent insolvency or insolvency becomes unavoidable. The aim of imposing such obligations, which become enforceable once insolvency proceedings commence, is to protect the legitimate interests of creditors and other stakeholders and encourage timely action to address financial distress and minimize its effects. This publication addresses the key elements of provisions imposing such obligations, as well as the nature of the obligations, the time at which the obligations should arise, the persons to whom the obligations would attach, liability for breach of the obligations and enforcement of those obligations, specifically applicable defences, remedies, the persons who may bring an action to enforce the obligations and how those actions might be funded.

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Elements of directors’ obligations in the period approaching insolvency

While the underlying rationale for considering directors’ obligations in the vicinity of insolvency may be similar in different jurisdictions, different approaches are taken to formulating those obligations and determining the standard to be met. In general, however, laws tend to focus upon two aspects—first, imposing civil liability on directors for causing insolvency or failing to take appropriate action in the vicinity of insolvency (which under some laws might include commencing insolvency proceedings pursuant to an obligation under national law to do so—see paragraph 2 below) and second, once insolvency proceedings have commenced, avoiding actions taken by directors, including transactions that may have been entered into, in the vicinity of insolvency.

English

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