Protection of Creditors in Public Limited Companies: Second Council Directive and Albanian Company Law Compared: Is There a Need for Reform?
48 Pages Posted: 8 May 2008
Date Written: September 30, 2004
The public company was the invention that allowed entrepreneurs to raise substantial amounts of capital to finance big projects. These huge amounts of money could not be mobilized without granting to entrepreneurs the privilege of limited liability. Limited liability would give them the courage to invest the money put forward by investors in projects, which sometimes entailed too high a risk of failure. The privilege of limited liability meant that the danger of failure was shifted from the entrepreneurs to the investors.
Because of this shift in bearing the costs of failure, the entrepreneurs would have the incentive to abuse with the privilege of limited liability, jeopardizing the interests of the investors, be they shareholders or creditors.
Should law protect the creditors of the company, or should creditors look out for themselves? If yes, how much protection should law provide? Is there any benefit from protecting this group of investors? In the European level, does the Second Company Law Directive for the protection of creditors provide the mechanisms? Is Albanian Company Law providing the basic creditors' protection mechanisms required by the Second Directive? We try to answer these questions and end our paper with few recommendations on how to better align Albanian Company Law with the Second Directive as far as the protection of creditors' interests is concerned.
Keywords: Public companies, shareholders, creditors, EU Company Law Directive, Albanian Company Law
JEL Classification: G32, G34, G38, K22
Suggested Citation: Suggested Citation