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Introduction to Company Law

Introduction to Company Law (3rd edn)

Paul Davies
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date: 16 October 2021

p. 2237. Creditorslocked

p. 2237. Creditorslocked

  • Paul DaviesPaul DaviesSenior research fellow, Harris Manchester College, Oxford


Because of limited liability, creditor protection has always been a feature of company law. Large creditors can contract ex ante for customised protection and the law facilitates this in various ways, notably by the creation of the floating charge. Non-adjusting creditors require the protection of mandatory rules, at least in some situations. Creditor protection in relation to companies in the vicinity of insolvency is now well established, not only through ‘wrongful trading’ but also via transaction invalidity rules and directors’ disqualification. For going-concern companies the emphasis is on rules restricting the shifting assets to shareholders via distributions and associated rules relating to the maintenance of capital.

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