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The imposition of duty on directors to creditors provides protection to creditors
because directors have to be cautious in their decisions not to cause the company to
become insolvent or else they will be personally liable. It is most appropriate to
impose an obligation on directors to consider creditors‟ rights at that time because
they are most affected when the company is insolvent.
This means creditors‟ rights are protected only after the company is already in
financial difficulty; hence, the likelihood of being paid in full is doubtful. This has
been argued by the pluralists or communitarians as inadequate because creditors‟
interests are better protected if they have the right to restrain the company from
taking actions. Due to the structures of corporate law in common law countries, it
seems very unlikely that the law will change in the near future because it will involve
amendment to the whole corporate culture and jurisprudence, particularly to the
current concept of directors‟ duties. 150
150 See Lucian Arye Bebchuk and Mark J. Roe “A Theory of Path Dependence in Corporate
Ownership and Governance” (1999) 52 Stanford LR 127.
150