Fiduciary Duties of Directors of Insolvent Corporations: A Comparative Perspective

Over the last two decades, in many jurisdictions great emphasis has been placed on directors’ fiduciary duties when a corporation is insolvent or in the amorphous “zone of insolvency”; notably, to investigate whether the directors should continue to promote the best interests of the corporation for the benefits of its shareholders, or whether their duties shift to creditors. The resolution of this ubiquitous issue will help to answer the following questions: Do creditors have standing to pursue claims for breach of fiduciary duties in the insolvency scenario? And, if they do, is it direct or derivative standing? This Article will address both questions. Moreover, it will discuss the issue of who has standing to assert (direct or derivative) claims against directors who have failed to act in the best interests of the corporation upon the commencement of a reorganization proceeding. The Article compares three countries—the United States, France, and Italy—where the role of the reorganization or the (pre-)insolvency proceedings in overcoming corporate crises has been prominent for many years, or has been increasing in importance year by year. Particularly, this comparative analysis aims to highlight the differences between the United States, France, and Italy in terms of creditors’ protection vis- ` a-vis directors’ mismanagement and to evaluate the effectiveness of their respective regulatory and judicial responses