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European Business Organization Law Review 7: 357-408 357 T M C SSER PRESS DOI
2006 . . .A 10.1017/S1566752906003570
A Synthetic View of Different Concepts of Creditor Protection, or: A High-Level Framework for Corporate Creditor Protection
Peter O. Mlbert 1. Introduction.............................................................................................. 359
2. Foundations.............................................................................................. 362 2.1 Three layers of creditor protection problems within the European
Union ....................................................................................................... 362
2.2 The approach to designing a system for efficient creditor protection...... 363 2.3 The principle of non-liability of corporate decision-makers towards corporate creditors ................................................................................... 364
2.4 Possible reasons for protecting corporate creditors ................................. 364 2.5 Approach and organization of the paper .................................................. 365
3. Types of corporate creditors .................................................................... 366
4. Types of corporate creditor risks ............................................................. 366 4.1 Voluntary corporate creditors .................................................................. 367 4.1.1 Time......................................................................................................... 367 4.1.2 Cause ....................................................................................................... 367 4.1.3 Originator................................................................................................. 368 4.2 Involuntary corporate creditors................................................................ 369 4.3 Particularities of corporate creditors risks .............................................. 369
5. The extent of corporate creditor protection.............................................. 370 5.1 Efficient corporate creditor protection and its limits ............................... 370 5.2 Initially inappropriate contractual terms and conditions.......................... 372 5.3 Ex post devaluation of a claim ................................................................. 372 5.3.1 Strong-form opportunism ........................................................................ 373 5.3.2 Weak-form opportunism.......................................................................... 374 5.3.3 Business misfortune................................................................................. 374
Prof. Dr Peter O. Mlbert holds the chair of Private Law, Commercial Law, and Banking Law at the University of Mainz, and serves as director of the Center for German and International Law of Financial Services at the University of Mainz. E-mail: [email protected]. Authors homepage: <http://www.jura.uni-mainz.de/~muelbert>.
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Peter O. Mlbert EBOR 7 (2006)
6. Mandatory protection rules v. creditor self-help...................................... 375
7. Strategies for mandatory creditor protection ........................................... 377
8. Reducing the risks of creditors when contracting with a financially distressed company.................................................................................. 379
8.1 Mandatory disclosure unrelated to insolvency......................................... 379 8.2 Insolvency-related mandatory disclosure................................................. 381 8.2.1 German v. British law.............................................................................. 3818.2.2 Timing ..................................................................................................... 382
9. Reducing a companys probability of entering into financial distress ..... 383 9.1 Legal capital............................................................................................. 383 9.1.1 Minimum capital...................................................................................... 385 9.1.2 Limitations on asset distributions to shareholders ................................... 388 9.2 Sufficient working capital (undercapitalization) .................................. 392 9.3 Subordination of shareholder claims ....................................................... 394 9.3.1 The German subordination regime .......................................................... 394 9.3.2 The economic rationale............................................................................ 396 9.4 Controlling other forms of opportunistic behavior .................................. 3999.5 Disqualification of directors .................................................................... 399
10. Reducing the risks of existing creditors from...