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Introduction to Company Law

Introduction to Company Law (2nd edn)

Paul Davies
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date: 16 October 2021

4. Limited Liability

The Limits of Creditor Self-Helplocked

4. Limited Liability

The Limits of Creditor Self-Helplocked

  • Paul DaviesPaul DaviesAllen & Overy Professor of Corporate Law, University of Oxford

Abstract

Celebrated for their conceptual clarity, titles in the Clarendon Law Series offer concise, accessible overviews of major fields of law and legal thought. This chapter analyses the role of company law in providing mandatory rules to control company opportunism. It focuses on three sets of rules where creditor protection has traditionally been thought to be a primary concern of company law. The first set consists of those rules which either require a company to have a certain level of assets at its disposal before it commences business or which restrict the ability of the company, after it has commenced business, to move assets out of the corporate ‘box’ and into the hands of the shareholders. The second set of rules are those which aim to reduce opportunism on the part of company controllers, which takes the form of adding to the company's liabilities at a time when there is little hope that there will be sufficient assets in the company's coffers to meet the creditors' claims when they fall due. Finally, the chapter looks at the rules governing opportunism towards creditors within corporate groups and especially the position of involuntary creditors in such situations.

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