Governance of Distressed Firms

Governance of Distressed Firms

Corporations, Globalisation and the Law series

David Milman

The concept of a distressed firm covers businesses that are struggling, but have not yet entered formal insolvency, as well as those businesses that are undergoing a formal insolvency process. With reference primarily to English law, this study encompasses both limited liability companies and limited liability partnerships with a focus on the regulation both of company directors and insolvency practitioners. It offers recommendations for improvements in governance mechanisms and notes that many of the governance shortfalls that occur can be related to the ease of access given to those who wish to trade with the benefit of limited liability.

Chapter 6: Reflections and reform

David Milman

Subjects: law - academic, company and insolvency law, corporate law and governance


The essential nature of the stewardship role performed by directors and insolvency practitioners with regard to distressed companies has a number of similarities. Both are fiduciaries and agents; neither are trustees (save in exceptional circumstances). There is an expectation that standards of reasonable care will be maintained. One of the most common facets of their respective stewardship obligations is the growing recognition of the importance of keeping themselves well informed of essential facts.

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