It is timely to examine alternatives to imposing liability on directors for creditor losses when a company is unable to pay its debts. Directors’ personal liability for corporate fault and corporate social responsibility are currently being investigated by parliamentary committees, but there are dangers of risk aversion and unfair legal complainace burdens on directors if liability is extended too far. This article examines alternatives to director liability, such as mandatory capitalisation or insurance, shareholder liability and government funded schemes, to assess whether they provide appropriate and sufficient compensation for losses in times of corporate failure. It is concluded that imposing liability on directors appears to be a superior way in which to ensure creditor protection because it not only potentially gives creditors access to funds for compensation but also deters the adverse behaviour which may be a cause of loss to creditors.
"Directors' Liability to Creditors - What are the Alternatives?,"
Bond Law Review:
2, Article 1.
Available at: http://epublications.bond.edu.au/blr/vol18/iss2/1