Fiduciary Duties of Company Directors Where There is a Likelihood of Insolvency

Abstract

In the field of corporate insolvency law, European Union legislation has aimed to promote the availability and success of out-of-court restructurings for distressed businesses, an objective further supported by the 2019 Directive on restructuring and insolvency, which contains provisions that specifically focus on early restructuring actions, as soon as there is a likelihood of insolvency. When a company is in the pre-insolvency situation, directors must react to the relevant probability of insolvency as early as possible, while avoiding any deliberate acts or omissions aimed at the pursuit of their personal and professional interests and also taking into account in the scope of their discretion the interests (or rather, concerns) of creditors, taking into account in their business decisions the aversion to any management decision that may have a relevant impact on social assets, possibly reducing it, without there being a potential gain of equivalent relevance (asset and probability) in business continuity that may justify it. Such are, going forward, the contents of their fiduciary duties where there is a likelihood of insolvency.

Keywords: Directive on restructuring and insolvency, Pre-insolvency, Financial difficulties, Director's duties

JEL Classification: K22