ממשל תאגידי חדש לחברות בקשיים פיננסיים

Translated title of the contribution: A new corporate governance for financially distressed corporations

Research output: Contribution to journalArticlepeer-review

Abstract

The state of financially distressed corporations draws special attention to their corporate governance. The board of a financially distressed corporation must be balanced and composed effectively in order to address the various economic interests of the actors involved – the shareholders, on the one hand, and the debt holders, on the other. Existing corporate law and insolvency law do not allow for efficient and just decision-making by the boards of financially distressed corporations. Prior to formal insolvency proceedings,the board is comprised exclusively of directors appointed by shareholders.Once insolvency proceedings have begun, however, the board is replaced by a court-appointed trustee who does not necessarily possess business managerial skills. Moreover, current law enables any single creditor to initiate enforcement actions against the debtor corporation and its property prior to formal insolvency proceedings, which, in turn, may thwart attempts to stabilize the corporate business and reorganize its debt structure. In this article, we propose a structural reform of the composition of the board of a financially distressed corporation, prior to insolvency proceedings, by empowering creditors to appoint directors to the board of such firms. The addition of debtor-appointed directors to the board will balance and enrich the perspective of the board and improve its discussions and decision-making. Another advantage of our proposal is that it will temper the zeal and fear of creditors, as well as their drive to push corporations into insolvency proceedings. The implementation of our proposal will not only enable financially distressed companies to better navigate the raging waters of economic crises, but also has the potential to save businesses and jobs from the abyss of bankruptcy.
Translated title of the contributionA new corporate governance for financially distressed corporations
Original languageHebrew
Pages (from-to)55-97
Number of pages43
Journalמשפטים
Volumeנ"ב
Issue number1
StatePublished - 2022

IHP publications

  • ihp
  • Bankruptcy
  • Boards of directors
  • Business failures
  • COVID-19 (Disease)
  • COVID-19 Pandemic, 2020-
  • Corporate governance
  • Corporation law
  • Corporations
  • Debt
  • Debtor and creditor
  • Financial crises
  • Management
  • Stockholders

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