Loading...
Governance in the Breach: Controlling Creditor Opportunism
Lipson, Jonathan C.
Lipson, Jonathan C.
Citations
Altmetric:
Genre
Journal article
Date
2011-07
Advisor
Committee member
Group
Department
Permanent link to this record
Collections
Research Projects
Organizational Units
Journal Issue
DOI
http://dx.doi.org/10.34944/dspace/6643
Abstract
Firms rarely go from solvency to Chapter 11 in an instant. Instead, the slide into bankruptcy will be marked by a period (the “zone of distress”) that begins with the breach of a lending contract and ends, perhaps months or even years later, with either a formal bankruptcy case or some other resolution, such as a nonbankruptcy restructuring or liquidation. In this period, the firm’s governance will be up for grabs. Doctrinally, state corporate law gives directors the power and responsibility to manage the firm for the benefit of shareholders, subject to fiduciary review. In fact, however, real control shifts away from directors and shareholders to creditors. Yet, the law offers little to check this control. Creditors are not generally viewed as fiduciaries, and so they owe their borrowers neither duties of care nor loyalty. In theory, regulation or contract could channel creditor conduct in the zone of distress, but three fundamental changes in the dynamics among distressed firms and their investors have weakened these constraints.
Description
Citation
Jonathan C. Lipson, Governance in the Breach: Controlling Creditor Opportunism, 84 S. Cal. L. Rev. 1035 (2011).
Available at: https://southerncalifornialawreview.com/2011/07/03/governance-in-the-breach-controlling-creditor-opportunism-article-by-jonathan-c-lipson/
Available at: https://southerncalifornialawreview.com/2011/07/03/governance-in-the-breach-controlling-creditor-opportunism-article-by-jonathan-c-lipson/
Citation to related work
University of Southern California
Has part
Southern California Law Review, Vol. 84, No. 5 (July 2011)
ADA compliance
For Americans with Disabilities Act (ADA) accommodation, including help with reading this content, please contact scholarshare@temple.edu