This Article offers an explanation of the doctrine of directors' duties to creditors. Courts frequently say - but rarely hold - that corporate directors owe duties to or for the benefit of corporate creditors when the corporation is in distress. These cases are puzzling for at least two reasons.First, they link fiduciary duty to priority in right of payment, effectively treating creditors as if they were shareholders, at least for certain purposes. But this ignores the fact that priority is a complex and volatile concept. Moreover, contract and other rights at law usually protect creditors, even (especially) when a firm is distressed. It is thus not surprising that courts do not in fact want to treat directors as fiduciaries for creditors, except in extreme cases. But this leaves us with the second puzzle: If directors are rarely treated as fiduciaries for creditors, why have the Delaware courts bothered to say so much about this, especially in their recent opinions?This Article explores these two puzzles, and argues that these cases are best understood as examples of expressive judging, exhortations to good behavior not necessarily tethered to meaningful instrumental consequences. It identifies four expressive themes in these decisions on, among other things, director discretion, the boundaries of acceptable conduct towards creditors, the role of contract, and the educative function of courts. The Article concludes by noting several doctrinal gaps created by some of the recent case law, and suggests ways that the better expressive aspirations of the Delaware opinions can fill these gaps in fair and efficient ways.

Essay from the year 2006 in the subject Law - Comparative Legal Systems, Comparative Law, grade: A, Victoria University of Wellington, course: LLM Research Paper, Master Abschlussarbeit, language: English, abstract: This essay deals with directors’ duties, focusing on the duties that specially arise in the context of a company becoming insolvent. The relevant duties are those under sections 131, 135 and 136 of the Companies Act 1993. The drafting of these insolvent trading provisions in New Zealand has been criticised in the legal literature. This research paper considers not only this criticism but also deals with the more general debate about the value of insolvent trading provisions in general. Although the current drafting of the relevant provisions in New Zealand is not without minor flaws, the need for creditor protection requires the maintenance of insolvent trading provisions in general. Besides that, this essay looks at the remedies for breaches of directors’ duties. The most important provision in this context is s 301 Companies Act 1993. Pursuant to this provision both the liquidator and individual creditors can enforce directors’ civil liability. However, the possibilities of individual creditors to obtain payment directly to themselves are restricted. The final part of this essay considers the question whether a separate duty directly owed to individual creditors should be introduced. Although such a duty seems to have some benefits, it would not be commensurate with leading principles and ideas of Insolvency Law and should therefore not be introduced. It is the concern of this research paper to point out the many issues that arise in context of directors’ duties and insolvency law and to show that it is important to strike an appropriate balance between the intended creditor protection and the entrepreneurial freedom of company directors.

When asked why people obey the law, legal scholars usually give two answers. Law deters illicit activities by specifying sanctions, and it possesses legitimate authority in the eyes of society. Richard McAdams shifts the prism on this familiar question to offer another compelling explanation of how the law creates compliance: through its expressive power to coordinate our behavior and inform our beliefs. “McAdams’s account is useful, powerful, and—a rarity in legal theory—concrete...McAdams’s treatment reveals important insights into how rational agents reason and interact both with one another and with the law. The Expressive Powers of Law is a valuable contribution to our understanding of these interactions.” —Harvard Law Review “McAdams’s analysis widening the perspective of our understanding of why people comply with the law should be welcomed by those interested either in the nature of law, the function of law, or both...McAdams shows how law sometimes works by a power of suggestion. His varied examples are fascinating for their capacity both to demonstrate and to show the limits of law’s expressive power.” —Patrick McKinley Brennan, Review of Metaphysics