Fiduciary Duties Of Dirrctors To Creditors On Critical Period Of Bankruptcy

The traditional company law says director should not commit thefiduciary duties to anyone else except from the company. Directorsshould only be faithful to company and consider only compapy’s intrestwhile exercising authority. Today, as directors have more and more power,illegal activities among directors are common, which probably result inthe reduction of company’s wealth or even bankrupcy. If so, creditors’interests have to face the risk that debts could not be paid off or partiallypaid off. In this case, according to the provisions of company law,creditors seemingly could do nothing but watch the infringement of theirrights and interests by directors. So, should directors commit thecorresponding fiduciary duties to protect creditors’ intersets? If we use therelevant legal precedent in the Anglo-American law for reference, theanswer obviously is yes which however should add one extra premise,That is director should commit the corresponding fiduciary duties tocreditor in a particular situation, which means when the company is in the critical period of bankruptcy and can not pay off all the debts or close tothat.There are six parts of the article. In the first chapter, it elaborates thetheory basis that director commit the fiduciary duties to creditor. It beginswith the introduction of director’s legal status and legal relation betweendirector and creditor. The special legal status determines that directorhave to maximise shareholders’ interests and ignore the creditor’s benifits.The legal relation indicate that director’s responsibility target iscorperation and have not any duty to creditor. It is because that, directordon’t commit the fiduciary duties to creditor in an ordinary way. To breakthrough the traditional theory basis, we will discuss the Trust FundDoctrine in the next which provide a theoretical model for that directorcommit the fiduciary duties to creditor.The second chapter is about the time director commit the fiduciaryduties to creditor.It spells out the migration rules of director’s fiduciaryduty object. And then it induces that the physical time director committhe fiduciary duties to creditor is when corperation is disable to pay bystudying some american legal cases. Following that is the description ofdefinition standard of insolvent.In the third part, it points out the necessity for director to commit thefiduciary duties to creditor. The argument is respectively by analyzing thenegative effects of company’s limited liability system on protecting creditor’s interests and also analyzing the corporation social responsibilitytheory and stakeholder theory.The next part is about the way director commit the fiduciary dutiesto creditor. In this part, it analyse the two ways and its characteristicsdirector commit the fiduciary dutis to creditor, direct and indirect.In the fifth part, it introduce the substance by clarifing duty ofloyalty and compulsoriness. It also compare the substence of whatdirectors commit to company and to creditor.In the follwing chapter, it contrast with other related institutionsincluding cancellation right in the debt’s preserve systems and Disregardof corporate personality. Through this contrast, author sort out thediffences among those institutions in the direction of protecting creditor’sinterest.