Directors' responsibility to creditors in Company law

Abstract

This paper deals with the issue of directors’ responsibility as one of the main instruments of efficient creditor protection. In continental laws this responsibility can be established in tort law, based on fault. Also, UK law and most developed continental laws are also introducing special instruments of directors’ liability when a company is in the vicinity of insolvency through wrongful trading or similar functional equivalent rules. Different national law systems of directors’ responsibility are compared with the current regime of directors’ responsibility in Serbian law. We conclude that in Serbian law there is no direct responsibility of directors to creditors, neither through Company Law rules, nor general rules of Civil Law, particularly tort responsibility. Also, Serbian Insolvency Act does not recognize wrongful trading or similar instruments by which directors could be directly responsible if the company is near or in insolvency. Although the newly adopted Company Act in Serbia does introduce one particular case of direct responsibility of directors to creditors, it is still very limited and offers neither adequate nor sufficient protection. This situation, as well as widely existing opinion of case law concerning tort responsibility to third parties only for a company is analyzed and criticized on several particular issues. In this article we urge introduction of wider rules in future legislative amendments, by which directors would be personally responsible to creditors in exceptional situations. Preferably this could be introduced by general tort responsibility or special company law rules, or through wrongful trading, either alternatively or cumulatively. This would provide more protection for creditors, which has become even more pertinent after the minimum capital requirement was abandoned and rules concerning distribution of profits relaxed in respect of limited liability companies.