ABSTRACT
Thus far we have seen that while directors do not owe a duty to creditors at all times, there are circumstances when they do. What are those circumstances? This chapter seeks to provide some answers to that question. The chapter identifies and then examines the circumstances that the courts have identified as causing the duty to take into account creditors’ interests to arise. Next, the Chapter assesses the positions taken in the various cases and considers what circumstances should exist before directors are obliged to consider creditors’ interests. It is asserted in this chapter that there is a clear relationship between the extent of the risk of insolvency and the extent of the permissible risk to which directors can expose the assets of the company. Hence, the duty considered here is designed to protect the assets of the company when they are at risk of being lost. The assets may well be at risk because the directors are tempted to embrace a lucrative deal from which the shareholders will gain (and, if they are shareholders, from which the directors themselves will gain), but which will cause loss to the creditors if the deal is not successful.
