Legislative Construction on Directors'Duty of Filing for Insolvency on the Verge of Company Insolvency
When a company has lost or is about to lose its solvency on the verge of its insolvency,the operating risks are likely to be transferred from the shareholders to the creditors.The company directors'duty of filing for insolvency is an important measure to help the creditors cope with the above risks,because this system can effectively curb the internal opportunistic behaviors of shareholders,directors and creditors and prevent the continuous loss of company assets.In theory,both"direct duty theory"and"indirect duty theory"can provide logical support for its legislative construction.The former emphasizes that company directors bear direct fiduciary duty to creditors on the verge of company insolvency,while the latter holds that company directors should still bear overall fiduciary duty to the company but should focus on the interests of creditors in decision-making.From the perspective of corporate governance prac-tice in China,there are also practical needs to promote the legislation of this system,including balancing the weakening of the subscribed capital contribution system to the statutory capital rules,making up for the deficiencies of the regulation on the initiation of insolvency proceedings,conforming to the develop-ment of the governance model that centers on the board of directors,and bridging the institutional gap between the company law and the insolvency law,among others.Moreover,whether it is the explicit provisions of the system in Germany and Austria or the functional altemative provisions such as the"deepening insolvency theory"in the U.S.or the"wrongful trading clause"in the U.K.,they can provide references for the legislation in China.As for the specific case in China,it is suggested to take the"deep-ening insolvency theory"as the guide and embed it into the insolvency law system.In addition,a system-atic framework should be established to define the triggering conditions,clarify the boundaries of the subject initiating such process,regulate the restricted period,and integrate the restructuring procedure into the directors'duty of filing for insolvency.The framework should also cover the responsibilities of directors and the prosecuting mechanism of creditors if the directors violate their duty of filing for insol-vency.
China's Company Law of 2023on the verge of insolvencydirectorduty of filing for insolvencycorporate bankruptcy law
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