Incomplete Contracts, Contingent Fiduciaries, and a Director’s Duty to Creditors

37 Pages Posted: 23 Mar 2011

See all articles by Andrew R. Keay

Andrew R. Keay

University of Leeds - School of Law

Hao Zhang

University of Macau - Faculty of Business Administration

Date Written: 2008

Abstract

This article presents economic arguments for extending a limited form of fiduciary duty to creditors. It clarifies the two components of debtor-firm opportunism against creditors: director-opportunism and shareholder-opportunism. The analysis, carried out within the economic perspective of incomplete contracts, focuses on three elements: incomplete contracts, self-interest seeking individuals, and consequential ex post opportunism. The emphasis is on suggesting that the catalyst for a fiduciary duty is the presence of opportunistic behaviour, rather than arguing that it will depend on when a firm is in, near, or in danger of insolvency.

Keywords: Incomplete Contracts, Directors' Duty to Creditors

Suggested Citation

Keay, Andrew R. and Zhang, Hao, Incomplete Contracts, Contingent Fiduciaries, and a Director’s Duty to Creditors (2008). Melbourne Univeristy Law Review, Vol. 32, No. 1, 2008, Available at SSRN: https://ssrn.com/abstract=1788602 or http://dx.doi.org/10.2139/ssrn.1788602

Andrew R. Keay

University of Leeds - School of Law ( email )

Corporate and Commercial Law
Leeds LS2 9JT
United Kingdom
0113-343-6389 (Phone)

Hao Zhang (Contact Author)

University of Macau - Faculty of Business Administration ( email )

Macau

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