insolvency and restructuring
Shareholder’s liability for creditor’s loss resulting from subsidiary’s failure to file a bankruptcy petition
The degree to which a company’s creditors are satisfied may depend in large measure on timely filing of a bankruptcy petition. But sometimes the dominant shareholder will pressure the members of the management board to refrain from filing for bankruptcy.
Acquiring assets through a bankruptcy proceeding may be more beneficial for the buyer—and not only for purely economic reasons.
A creditor affected by asset-stripping by a debtor doesn’t have to remain a passive victim of dishonesty.
Arbitrary, selective payment of only certain debts may result in criminal liability of the debtor, including in a case where it is only threatened with insolvency, if such action exposes other creditors to a loss.
A fraudulent conveyance action protects creditors in the event of the debtor’s insolvency. The ability of specific creditors to use this instrument is limited, however, because of the importance of protecting the interests of all creditors.
When assets are being removed from a debtor threatened with insolvency, the creditors face a choice of seeking to set aside such transactions independently, or filing a bankruptcy petition and relying on the actions of the bankruptcy trustee.