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CHAPTER 11 REMEDIAL CONSEQUENCES OF BREACH OF
DIRECTORS’ DUTIES
11.1 Introduction
In the preceding chapters, discussions have been centered on directors‘ common law
and statutory duties, particularly in relation to creditors‘ protection, in order to
determine when and how directors would be liable. This chapter will address the
remedies and consequences of such breaches and in doing so will discover whether
creditors benefit from them. Since the thesis uses a comparative methodology,
various provisions will be examined to determine any similarities or differences in
the wording of the statutes. Then case analyses from different jurisdictions will be
examined to determine how judges interpret the sections, and consequently whether
creditors will benefit from them. Apart from statutory provisions, remedies accorded
at common law will also be considered.
In addition, this chapter will look at the corporate insolvency processes which are
available to directors when the company‘s finances are in dire straits. Each of these
alternatives will be considered to determine its advantages as well as disadvantages
and its effects on creditors.
11.2 Corporate Insolvency Processes
11.2.1 Receivership 1
A secured creditor who obtains a charge on the company assets does so by way of a
debenture. The debenture reserves the right of the debenture holder to appoint a
receiver 2 in the event the company defaults on any of the terms of debenture. The
1 A receivership refers to the situation when a receiver is appointed in order to protect the interest of
the debenture holders.
2 A receiver can be divided into a ‗receiver‘ and a ‗receiver and manager.‘ The former is merely to
collect and realize the secured assets covered by the debenture and he or she is not authorized to
carry on the business of the company. The latter, on the other hand, is expressly empowered in the
instrument which appointed him or her to run the company with the intent to realize the assets on
the basis of a going concern. For the purpose of the discussions, a receiver in this thesis refers to
both a ‗receiver‘ and a ‗receiver and manager.‘
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