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Full-Text Articles in Law
The Expressive Function Of Directors’ Duties To Creditors, Jonathan C. Lipson
The Expressive Function Of Directors’ Duties To Creditors, Jonathan C. Lipson
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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 …
Recharacterization And The Nonhindrance Of Creditors, David A. Skeel Jr., Georg Krause-Vilmar
Recharacterization And The Nonhindrance Of Creditors, David A. Skeel Jr., Georg Krause-Vilmar
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Using a 1977 article by Robert Clark as the starting point, this article attempts to shed new light on the question of whether and when shareholder loans to her company should be either equitably subordinated or, as courts have done in a few recent cases, recharacterized as equity. In its emphasis on the particular issue of shareholder loans, the article has a narrower compass than Clark’s article, which uses a four-part typology to explore the relationship among fraudulent conveyance law, equitable subordination, veil piercing and dividend restrictions. But the article also expands Clark’s analysis in several respects. The most important …