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Corporate Governance in Financial Distress

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Part of the Palgrave Studies in Governance, Leadership and Responsibility book series (PSGLR)

Abstract

This chapter focuses on corporate governance during periods of financial distress. It reviews the changing roles of directors, shareholders and creditors as alternative informal rescue mechanisms are implemented. The review highlights the governance implications of the increasing importance of secured creditors as an influence on director decision-making. It also examines how the implementation of different informal rescue approaches may challenge or compromise the way in which directors fulfil their legal responsibilities.

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Notes

  1. 1.

    IA 1986, s 248(b). A security interest created by mortgage requires the “transfer of ownership” whilst a charge may be created on the “proceeds of debtor’s property for satisfaction of debt due”. Lien allows a secured creditor to maintain the retention of possession until full payment of debt. A mortgage requires transfer of ownership.

  2. 2.

    Under rule 10.8 of the Financial Conduct Authority Handbook, a financially distressed company may obtain a waiver with regard to seeking shareholder approval when asset sale is initiated.

  3. 3.

    See CA 2006, s 741 relating to registration of debentures and part 25 relating to charges and their registration.

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Parkinson, M.M. (2018). Corporate Governance in Financial Distress. In: Corporate Governance in Transition. Palgrave Studies in Governance, Leadership and Responsibility. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-77110-6_4

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