1. Diritto commerciale II
Paola Lucantoni
Professore associato di Diritto dei mercati finanziari
Università degli Studi di Roma “Tor Vergata”

2. Core structural characteristic
LEGAL PERSONALITY B
LIMITED LIABILITY

3. Firm’s creditor’s dual role in relation to other participants in the enterprise.
Ordinary circumstances
Most creditors are no more than contractual counterparties
Default scenario
The creditor becomes entitled to seize and sell its assets
The creditors change role: owners of the firm's assets.

4. Firm’s creditor’s dual role in relation to other participants in the enterprise.
Ordinary circumstances
Agency problems: possibility of opportunistic behaviour by the firm acting in the interests of its shareholders.
creditor –shareholders conflict of interest.
Default scenario
Agency problems: ensuring that one group of creditor is not expropriated by another
creditor – creditor conflict of interest.

5. Creditor –shareholders conflict of interest
Asset partitioning and corporate creditors
Securitisation
shareholder – creditor agency problems
Ex ante: problems connected with misrepresenting the value of corporate assets
Ex post: actions that benefit the shareholders at the expense of the creditors.
Asset dilution – asset substitution

6. Creditor –shareholders conflict of interest
The vicinity of insolvency
Legal restriction targeting corporations in financial distress
Groups
Groups structures make intensive use of corporate law’s asset partitioning functions within a single economic firma – this can be used to facilitate the allocation of credit risk to creditors best place to evaluate and monitor particular assets.
Externalities: workers, consumers, environment
i.e. Brasil: unlimited liability through veil piercing whenever corporate assets are insufficient to compensate the damages caused to workers, consumers, environment

7. Creditor – creditor conflict of interest.
Classes of creditors
Dividing line: insolvency

8. Solvent firms: How corporate law seeks to control shareholder – creditor agency problems
The affiliation strategy: disclosure:
Closely held corporations
Banks are the principal supplier of outside finance to small companies – close companies must prepare financial statement available for public inspection
Publicly traded corporations
Disclosure – extensive regulated
USA and EU : prospectus regulation and transparency regulation
Groups
Creditors of group companies are especially vulnerable to shareholder opportunism
The role of the gatekeepers
CRA

9. Solvent firms: How corporate law seeks to control shareholder – creditor agency problems
The rules strategy: Legal capital.
Prescribing a minimum of capital
Restriction on payment out to shareholders
Triggering actions that must be taken

10. Distressed Firms: How corporate law seeks to control shareholder – creditor agency problems
Ex post liability
Directors: personal liability for net increases in losses to creditors resulting from the board’s negligence or fraud to creditors
USA: lowest intensity standard for directorial liability to creditors – consistent with its long story of dispersed ownership and managerial autonomy – shift the duty to the corporation rather then individual creditors – also UK
Italy and France: responsibility for taking actions following serious loss of capital
Japan: actions taken earlies even when the company is solvent

11. Distressed Firms: How corporate law seeks to control shareholder – creditor agency problems
Ex post liability
Shareholders:
The doctrine of the facto or shadow directors
Pierce the corporate veil
Creditors and other third parties
Avoiding that a particular creditor being placed in a better position than the others in the debtor’s bankruptcy

12. Distressed Firms: How corporate law seeks to control shareholder – creditor agency problems
The governance strategy in distressed companies – triggering bankruptcy proceedings