1. Section 214(6).

2. See F 214(1).

3. See s 214(2).

4. Section 214(3).

5. For example, F Oditah ‘Wrongful Trading’ [1990] LMCLQ 205; L Doyle ‘Anomalies in the Wrongful Trading Provisions’ (1992) 13 Co Law 96; A Hicks ‘Advising on Wrongful Trading: Part 1′ (1993) 14 Co Law 16; A Hicks ‘Advising on Wrongful Trading: Part 2′ (1993) 14 Co Law 55; P Godfrey and S Nield ‘The wrongful trading provisions -all bark and no bite’ (1995) 11 IL & P 139; R M Goode Principles of Corporate Insolvency Law (London: Sweet & Maxwell, 2nd edn, 1997) pp 458–477; A Walters ‘Enforcing Wrongful Trading -Substantive Problems and Practical Incentives’ in B A K Rider (ed) The Corporate Dimension (Bristol: Jordans, 1998); C Cook ‘Wrongful Trading -Is it a Real Threat to Directors or a Paper Tiger’ [1999] Insolv L 99; S Griffin Personal Liability and Disqualification of Company Directors (Oxford: Hart Publishing, 1999) pp 57–98; M Simmons ‘Wrongful Trading’ (2001) 14 Insol Int 12; P Fidler ‘Wrongful trading after Continental Assurance’ (2001) 17 IL & P 212; A Keay McPherson's Law of Company Liquidation (London: Sweet & Maxwell, 2001) pp 621–634.

6. K Yeung ‘Private Enforcement of Competition Law’ in C McCrudden (ed) Regulation and Deregulation (Oxford: Clarendon Press, 1999) p 40.

7. Companies Act 1990, s 138 (reckless trading).

8. Corporations Act 2001, ss 58K-588Y (insolvent trading).

9. Companies Act 1993, ss 135–136 (reckless trading).

10. For instance, France (Book II of the Commercial Code 2000 requiring a déclaration de cessation des paiements (directors must make a declaration of insolvency when their company is unable to pay their debts)). See P Omar ‘The European Initiative on Wrongful Trading’ [2003] Insolv L 239 at 245.

11. Report of the High Loel Group of Company Law Experts on a Modern Regulaton Framework for Company Law in Europe p 126, available at http://europa.eu.int/comm/internal_market/en/company/company/modern/consult/report_en.pdf.

12. Insolvency Law Review Committee Insolvency Law and Practice (generally referred to as the ‘Cork Report’) (Cmnd 858, 1982) paras 1776–1778.

13. S Schwarcz in ‘Rethinking a Corporation's Obligations to Creditors’ (1996) 17 Cardozo LR 647 at 668.

14. This is the prevailing approach in Anglo-American corporate governance, namely that the directors’ primary duty is to the shareholders of their companies. For a discussion, see J Macey ‘An Economic Analysis of the Various Rationales for Making Shareholders the Exclusive Beneficiaries of Corporate Fiduciary Duties’ (1991) 21 Stetson LR 23; D Gordon Smith ‘The Shareholder Primacy Norm’ (1998) 23 J Corp L 277; J Armour, S Deakin and S Konzelmann ‘Shareholder Primacy and the Trajectory of UK Corporate Governance’ (2003) 41 Br J Ind Rel 531.

15. B E Adler ‘A Re-Examination of Near-Bankruptcy Investment Incentives’ (1995) 62 U Chi LR 575 at 590–598; R de R Barondes ‘Fiduciary Duties of Officers and Directors of Distressed Corporations’ (1998) 7 George Mason LR 45 at 46,49; K H Daigle and M T Maloney ‘Residual Claims in Bankruptcy: An Agency Theory Explanation’ (1994) 37 J L and Econ 157. See Company Law Review Steering Group Modern Company Law for a Competitive Economy: Final Report vol 1 (London: DTI, 2001) para 3.15.

16. For example, Professor Ian Ramsay in ‘Models of Corporate Regulation: the Mandatory/Enabling Debate’ in C Rickett and R Grantham Corporate Personality in the 20th Century (Oxford: Hart Publishing, 1998) p 219.

17. D D Prentice ‘Creditor's Interests and Director's Duties’ (1990) 10 OJLS 265 at 277.

18. F Oditah ‘Wrongful Trading’ [1990] LMCLQ 205 at 222.

19. For instance, see P Godfrey and S Nield ‘The wrongful trading provisions-all bark and no bite’ (1995) 11 IL & P 139; Walters, above n 5; Cook, above n 5.

20. Disqualification of Directors: No Hiding Place for the Unfit Research Report no 59 (London: Chartered Association of Certified Accountants, 1998).

21. D Arsalidou ‘The impact of section 214(4) of the Insolvency Act 1986 on directors’ duties’ (2000) 21 Co Law 19 at 20.

22. See s 214(3).

23. A notable exception, in relation to aspects of the provision, is R J Mokal ‘An Agency Cost Analysis of the Wrongful Trading Provisions: Redistribution, Perverse Incentives and the Creditors’ Bargain’ (2000) 59 CLJ 335.

24. ‘Creditors’ Interest in the Corporate Contract: A Case for the Reform of our Insolvent Trading Provisions’ (1996) 6 Aust J Corp L 14.

25. ‘Corporate Directors’ Personal Liability for “Insolvent Trading” in Australia, “Reckless Trading” in New Zealand and “Wrongful Trading” in England: A Recipe for Timid Directors, Hamstrung Controlling Shareholders and Skittish Lenders’ in I M Ramsay (ed) Company Directors ‘Liability for Insolvent Trading (Melbourne: Centre for Corporate Law and Securities Regulation and CCH Australia, 2000).

26. ‘The Australian Insolvent Trading Prohibition - Why Does It Exist?’ (2002) 11 IIR 153 at 161 and ‘The Economic Necessity forthe Australian Insolvent Trading Prohibition’ (2003) 12 IIR 171.

27. For instance, see L S Sealy ‘Director's Wider Responsibilities-Problems Conceptual Practical and Procedural’ (1987) 13 Mon ULR 164; R Grantham ‘The Judicial Extension of Directors’ Duties to Creditors’ [1991] JBL 1; D A Wishart ‘Models and Theories of Directors’ Duties to Creditors’ (1991) 14 NZULR 323; M Byrne ‘An Economic Analysis of Directors’ Duties in Favour of Creditors’ (1994) 4 Aust J Corp L 275; A E Conway Stilson ‘Reexamining the Fiduciary Paradigm at Corporate Insolvency and Dissolution: Defining Directors’ Duties to Creditors’ (1995) 20 Del J Cop L I; Schwarcz, above n 13; ME Van der Weide ‘Against Fiduciary Duties to Corporate Stakeholders’ (1996) 21 Del J Corp L 27; R B Campbell Jr ‘Corporate Fiduciary Principles for the Post-Contractarian Era’ (1996) 23 U Fla LR 561; A Keay ‘Directors’ Duties to Creditors: Contractarian Concerns Relating to Efficiency and Over-Protection of Creditors’ (2003) 66 MLR 665; J Lipson ‘Directors’ Duties to Creditors: Volition, Cognition, Exit and the Financially Distressed Corporation’ (2003) 50 UCLA LR 1189.

28. Above n 25, p 29.

29. R J Daniels ‘Must Boards Go Overboard? An Economic Analysis of the Effects of Burgeoning Statutory Liability on the Role of Directors in Corporate Governance’ in J S Ziegel (ed) Current Developments in International and Comparative Corporate Insolvency Law (Oxford: Clarendon Press, 1994) p 569. See also Sealy, above n 27, at 186; S R McDonnell ‘Geyer v Ingersoll Publications Co: Insolvency Shifts Directors’ Burden From Shareholders to Creditors’ (1994) 19 Del J Corp L 177 at 209; C C Nicholls ‘Liability of Corporate Officers and Directors to Third Parties’ (2001) 35 Can Bus LJ 1 at 5.

30. For instance, see the government's White Paper Modernising Company Law vol 1 (Cm 5553–1,2002) para 3.2; R Tomasic and S Bottomley ‘Corporate Governance and the Impact of Legal Obligations on Decision Making in Corporate Australia’ (1991) 1 Aust J Corp L 55 at 83.

31. F Gibb ‘Directors chilled by the fear of financial liability’The Times, 23 September 2003.

32. P Wheatcroft ‘Let some others join the club’The Times, 15 October 2003.

33. H J Glasbeek ‘More Direct Director Responsibility: Much Ado About… What?’ [1985] Can Bus LJ 416 at 447.

34. [2001] BPIR 733.

35. In relatively recent days there has been a well-publicised investigation in the US into the work of the auditors of Enron when it entered bankruptcy.

36. It must be acknowledged that the auditing profession, most notably the big international accounting firms (known as ‘the Big Four’), has lobbied for a cap to be placed on the liability of auditors, due to concerns over the size of damages awards against auditors.

37. This is indicated in D Leibowitz ‘Cover charge’The Lawyer, 10 November 2003, p 25.

38. V Finch ‘Personal Accountability and Corporate Control: The Role of Directors’ and Officers’ Liability Insurance’ (1994) 57 MLR 880, especially at 890 and 902. According to Finch, insurance for directors has not been placed under the same stress as insurance for auditors (at 905).

39. Finch, above n 38, at 900.

40. ‘Directors face liability dilemma’ [2003] corporate Finance, May, p, 1.

41. Above n 40; N Hodge ‘UK companies say D & O rate increases don't reflect risks’ (2003) 37 Business Insurance 4.

42. Above n 25, p 30.

43. Above n 25, p 33.

44. See Kinsela v Russell Kinsela Pty Ltd (1986)4 ACLC 215 at 223; Equiticorp Finance Ltd (in liq) v BNZ (1993) 11 ACLC 952 at 1017.

45. Kinsela v Russell Kinsela Pty Ltd (1986) 4 ACLC 215; Equiticorp Finance Ltd (in liq) v BNZ (1993) 11 ACLC 952. See also the view of R Rao, D Sokolow and D White ‘Fiduciary Duty à la Lyonnais: An Economic Perspective on Corporate Governance in a Financially-Distressed Firm’ (1996) 22 J Corp L 53 at 65.

46. Ironically, directors might in such circumstances, absent any duty to take creditors’ interests into account, not be liable in taking such action, even though the action is close to reckless because the shareholders would not complain.

47. For example, Professor Brian Cheffins in Company Law: Theory, Structure and Operation (Oxford: Clarendon Press, 1997)p 543; D Wishart ‘Models and Theories of Directors’ Duties to Creditors’ (1991) 14 NZULR 323 at 340–341.

48. Above n 25, p 38.

49. Above n 25, p 38. A view apparently accepted by G Varallo and J Finkelstein ‘Fiduciary Obligations of Directors of the Financially Troubled Company’ (1992) 48 Bus Law 239.

50. Above n 25, p 38.

51. Above n 25, p 38. This is a view also held by H Butler and L Ribstein in ‘Opting Out of Fiduciary Duties: A Response to the Anti-Contractarians’ (1990) 65 Wash LR 1 at 56.

52. [2001] BPIR 733.

53. [2001] BPIR 733 at 771.

54. [1991] BCLC 491; [1991] BCC 121.

55. [1991] BCLC 491 at 498; [1991] BCC 121 at 127.

56. [2001] BPIR 733.

57. [2001] 1 BCLC 275.

58. [2001] 1 BCLC 275 at 305.

59. For example, above n 24, at 38; Cheffins, above n 47, p 543.

60. [1995] BCC 40.

61. [1995] BCC 40 at 54, per Judge Jack QC. Lewison J in Secretary of State for Trade and Industry v Goldberg [2004] 1 BCLC 597 at 613 made the same point in relation to an assessment of a director's conduct when hearing an application under the Company Directors’ Disqualification Act 1986.

62. Law Commission Company Directors: Regulating Conflicts of Interests and Formulating a Statement of Duties (Law Commission Consultation Paper no 153, 1998) para 15.30.

63. Cheffins, above n 47, p 545.

64. P Fidler ‘Wrongful trading after Continental Assurance’ (2001) 17 IL & P 212; N Spence ‘Personal Liability for Wrongful Trading’ (2004) 17 InsoI Int 11.

65. Fidler, above n 64, at 215.

66. Re Sherborne Associates Ltd [1995] BCC 40; Re Continental Assurance Co of London plc (2001] BPIR 733.

67. [1995] BCC 40 at 56.

68. [2001] BPIR 733.

69. [2001] BPIR 733 at 769.

70. W T Allen ‘Ambiguity in Corporation Law’ (1997) 22 Del J Corp L 894 at 899.

71. A point accepted as far back as 1982 by the Cork Committee (para 1800). See above n 12.

72. D Goddard ‘Corporate Personality - Limited Recourse and it s Limits’ in C Rickett and R Grantham Corporate Personality in the 20th Century (Oxford: Hart Publishing, 1998) p 22.

73. Above n 25, p 41.

74. Referring to the relations as contracts is probably incorrect. Some authors refer to the relations as bargains as some of the relations do not constitute contracts in a technical sense. See M Klausner ‘Corporations, Corporate Law and Networks of Contracts’ (1995) 81 Va LR 757 at 759.

75. FH Easterbrook and D R Fischel ‘The Corporate Contract’ (1989) 89 Col LR 1416 at 1426. At 1428 the learned commentators give examples of some of the arrangements.

76. The literature considering the nexus of contracts is too voluminous to cite. But see, for example, E E Fama ‘Agency Problems and the Theory of the Firm’ (1980) 88 J Pol Econ 228 at 290; Easterbrook and Fischel, above n 75, at 1426–1427. The nexus of contracts approach is critiqued by W W Bratton Jr in ‘The “Nexus of Contracts Corporation”: A Critical Appraisal’ (1989) 74 Cornell LR 407 at 412, 446–465. The scheme has been referred to as ‘a nexus of incomplete contracts’. For recent comments, see, for example, S Deakin and A Hughes ‘Economic Efficiency and the Proceduralisation of Company Law’ (1999) 3 CfiLR 169 at 176–180; I McNeil ‘Company Law Rules: An Assessment from the Perspective of Incomplete Contract Theory’ (2001) 1 JCLS 107.

77. ‘The Australian Insolvent Trading Prohibition - Why Does It Exist?’ (2002) 11 IRR 153 at 170.

78. M Posner ‘Credit Insurance: An Overview’ [2001] Credit Management, April, p 19.

79. M Mandell ‘Money's costing more’ (2002) 15(4) Troy 58 at 58.

80. M J Whincop ‘Painting the Corporate Cathedral: The Protection of Entitlements in Corporate Law’ (1999) 19 OJLS 19 at 30–31. For further discussion about the limitations of using contracts for protection, see A Keay ‘Directors’ Duties to Creditors: Contractarian Concerns Relating to Efficiency and Over-Protection of Creditors’ (2003) 66 MLR 665 at 690–692.

81. See the comments of C A Riley in ‘Contracting Out of Company Law: Section 459 of the Companies Act 1985 and the Role of the Courts’ (1992) 55 MLR 782 at 786 in this regard.

82. D B Tauke ‘Should Bondholders Have More Fun? A Reexamination of the Debate Over Corporate Bondholder's Rights’ [1989] Col Bus LR 1 at 15 n 28.

83. R Coase ‘The Nature of the Firm’ (1937) 4 Economica 386 at 391–392; Butler and Ribstein, above n 51, at 28; D M W Harvey ‘Bondholders’ Rights and the Case for a Fiduciary Duty’ (1991) 65 St John's LR 1023 at 1037; Whincop, above n 80, at 28.

84. See the comments of Cheffins, above n 47, p 524.

85. R A Posner ‘The Rights of Affiliated Corporations’ (1976) 43 U Chi LR 499 at 508.

86. ‘Creditors’ Interest in the Corporate Contract: A Case for the Reform of our Insolvent Trading Provisions’ (1996) 6 Aust J Corp L 14.

87. Above n 86, at 23.

88. Above n 86, at 23–24.

89. Above n 86, at 24.

90. See the comments of Cheffins, above n 47, pp 523–524.

91. Cheffins, above n 47, p 523.

92. Above n 24, at 30.

93. Above n 24, at 31.

94. Above n 24, at 31 (emphasis in original).

95. M J Whincop ‘The Economic and Strategic Structure of Insolvent Trading’ in IM Ramsay (ed) Company Directors’ Liability for Insolvent Trading (Melbourne: Centre for Corporate Law and Securities Regulation and CCH Australia, 2000) p 58.

96. Above n 95.

97. Above n 25, p 30. See also V C S Yeo and J L S Lin ‘Insolvent trading - a comparative and economic approach’ (1999) 10 Aust J Corp L 216 at 231–232; S R McDonnell ‘Geyer v Ingersoll Publications Co: Insolvency Shifts Directors’ Burden From Shareholders to Creditors’ (1994) 19 Del J Corp L 177 at 207.

98. L M LoPucki and W C Whitford ‘Corporate Governance in the Bankruptcy Reorganization of Large, Publicly Held Companies’ (1993) 141 U Pa LR 669.

99. Above n 23, at 353–354.

100. (1989) 5 BCC 569.

101. (1989) 5 BCC 569 at 598.

102. For instance, Re Produce Marketing Consortium Ltd (1989) 5 BCC 569; Re DKG Contractors Ltd [1990] BCC 903; Re Purpoint Ltd [1991] BCLC 491; [1991] BCC 121; Re Brian D Pierson (Contractors) Ltd [2001] 1 BCLC 275.

103. P James, I M Ramsay and P Siva ‘Insolvent Trading - An Empirical Study’ (2004) 12 Insolv LJ 210, and also available on the website of the Centre for Corporate Law and Securities Regulation, University of Melbourne at http://cclsr.law.unimelb.edu.au/research-papers/monograph%20series/Insolvent%20Trading%20final.pdf.

104. Above n 23, at 353–354.

105. Insolvency Act 1986, Sch B1, para 22(2).

106. Insolvency Act 1986, Sch B1, para 3(1).

107. [1991] BCC 171 at 172.

108. A Herzberg ‘Why are there so Few Insolvent Trading Cases?’ (1998) 6 Insolv LJ 177.

109. Above n 24, at 32.

110. It is to be noted that it has been held that directors are not able to be excused under s 727 of the Companies Act 1985 because relief is not compatible with s 214 (Re Produce Marketing Consortium Ltd (1989) 5 BCC 569; Re Brian D Pierson (Contractors) Ltd [2001] 1 BCLC 275). It is respectfully submitted that this is not necessarily the case. Both s 214 and s 727 involve subjective and objective tests, and so there should be no bar to the application of s 727 to s 214.

111. Above n 24, at 32.

112. Above n 24, at 32.

113. M Whincop ‘Taking the Corporate Contract More Seriously: The Economic Cases Against, and a Transaction Cost Rationale for, the Insolvent Trading Provisions’ (1996) 5 GLR 1 at 13. This is a point that Cheffins also makes: above n 47, p 523.

114. ‘The Australian Insolvent Trading Prohibition - Why Does It Exist?’ (2002) 11 IRR 153 at 160.

115. Cheffins, above n 47, p 523.

116. R Daniels ‘Must Boards Go Overboard?’ (1994-5) 24 Can Bus LJ 229 at 241; and referred to in Mokal, above n 23, at 352.

117. Insolvency Act 1986, Sch B1, para 22.

118. Insolvency Act 1986, Sch BI, para 26.

119. Insolvency Act 1986, Sch B 1, para 27.

120. Above n 108.

121. Above n 33, at 421.

122. [2001]BPIR 733.

123. Above n 113, at 26.

124. A view to which Whincop subscribes: above n 113, at 26.

125. See the comments in Re Barings plc (No 5) [1999] 1 BCLC 433 at 489.

126. Above n 95, at 45, and citing B Black ‘Is Corporate Law Trivial?: A Political and Economic Analysis’ (1990) 84 Nw ULR 542; Butler and Ribstein, above n 51; F H Easterbrook and D Fischel The Economic Strucrure of Corporate Law (Cambridge Mass: Harvard University Press, 1991).

127. ‘The Debate on Contractual Freedom in Corporate Law’ (1989) 89 Harv LR 1395.

128. The progressive school literature is voluminous and too extensive to cite in full. Examples of the scholarship can be seen in the monograph, L E Mitchell (ed) Progressive Corporare Law (Boulder, Colorado: Westview Press, 1995) and the following works: W W Bratton Jr in ‘The “Nexus of Contracts Corporation”: A Critical Appraisal’ (1989) 74 Corn LR 407; L E Mitchell ‘The Fairness Rights of Bondholders’ (1990) 65 NYULR 1165; D Millon ‘Theories of the Corporation’ [1990] Duke LJ 201; L Johnson ‘The Delaware Judiciary and the Meaning of Corporate Life and Corporate Law’ (1990) 68 Texas LR 865; and Mitchell (ed) Progressive Corporate Law, above. For critiques of progressive scholarship, see, for example, M E DeBow and D R Lee ‘Shareholders, Nonshareholders and Corporate Law: Communitarianism and Resource Allocation’ (1993) 18 Del J Corp L 393.

129. Some of the foremost have been Professors Douglas Branson, William Bratton, Lyman Johnson, David Millon and Lawrence Mitchell. For a brief consideration of the approach, see J Dine ‘Companies and Regulations: Theories, Justifications and Policing’ in D Milman (ed) Regulating Enterprise: Law and Business Organisations in the UK (Oxford: Hart Publishing, 1999) pp 295–296; J Dine Company Law (London, Sweet & Maxwell, 2001) pp 27–30 (where the learned commentator refers to it as ‘the communitaire theory’). The pluralist approach that has been advocated in the UK by those such as Professor John Parkinson (Corporate Power and Responsibility (Oxford: Clarendon Press, 1993) and (with Gavin Kelly) ‘The Conceptual Foundations of the Company: A Pluralist. Approach’ (1998) 2 CfiLR 174) provides some similar views to progressive scholarship.

130. Of course, just as with the law and economics school, not all progressives adhere to the same view on all matters.

131. For example, see D M Branson ‘The Death of Contractariansim and the Vindication of Structure and Authority in Corporate Governance and Corporate Law’ in Mitchell (ed) (1995), above n 128, p 93.

132. D Millon ‘Communitarianism in Corporate Law: Foundations and Law Reform Strategies’ in Mitchell (ed) (1995), above n 128, p 10.

133. D Millon ‘New Directions in Corporate Law: Communitarians, Contractarians and Crisis in Corporate Law’ (1993) 50 Wash and Lee LR 1373 at 1379.

134. Millon, above n 132, p 4.

135. Millon, above n 132, p 4.

136. See text relating to above nn 72–93. See also C C Nicholls ‘Liability of Corporate Officers and Directors to Third Parties’ (2001) 35 Can Bus LJ 1 at 23.

137. For instance, see L Lin ‘Shift of Fiduciary Duty Upon Corporate Insolvency: Proper Scope of Directors’ Duty to Creditors’ (1993) 46 Vand LR 1485 at 1502.

138. ‘Credit Control in Financially Distressed Firms: Empirical Evidence’ (1994) Wash ULQ 1005 at 1010, 1011.

139. A US study undertaken by Elliehusen and Woken found in 1993 that trade creditors made up 20 per cent of all non-bank, non-farm small businesses’ liabilities, as well as that 80 percent of all companies used trade credit, thus trade credit represents a significant part of corporate liabilities (‘An Empirical Investigation into Motives for Demand for Trade Credit’, Federal Reserve Board Study, 1993, and referred to in N Jain ‘Monitoring costs and trade credit’ (2001) 41 The Quarterly Review of Economics and Finance 89 at 90 and C V Atanasova and N Wilson ‘Borrowing Constraints and the Demand for Trade Credit: Evidence from UK Panel data’, July 2001, Leeds University Business School).

140. See the comments of Professor Lawrence Mitchell in ‘Trust. Contract. Process.’ in Mitchell (ed) (1995), above n 128, p 187.

141. An example is the building industry in Australia in the early 1990s when many construction companies entered liquidation following the savage recession of the late 1980s and early 1990s. Another example is the dot.com companies in the late 1990s.

142. Cheffins, above n 41, p 74.

143. J Hudson ‘The case against secured Lending’ (1995) 15 Int Rev Land Eon 47 at 56.

144. See Re M C Bacon Ltd [1990] BCLC 324; A Keay ‘Preferences in Liquidation Law: A Time for a Change’ (1998) 2 CfiLR 198.

145. F Easterbrook ‘Two Agency-Cost Explanation of Dividends’ (1984) 74 Am Econ Rev 650 at 655.

146. Above n 132, p 9.

147. For a discussion of trade creditors and the difficulties they face, see A Keay ‘A Theoretical Analysis of the Director's Duty to Consider Creditor Interests: The Progressive School's Approach’ (2004) 4 JCLS 307.

148. R A Posner ‘The Rights of Affiliated Corporations’ (1976) 43 U Chi LR 499 at 505.

149. M Byme ‘An Economic Analysis of Directors’ Duties in Favour of Creditors’ (1994) 4 Aust J Corp L 275 at 281.

150. Cmnd 858, 1982.

151. Cmnd 858, para 191.

152. For instance, D Sugarman ‘Is company law founded on contract or public regulation? The Law Commission's paper on company directors’ (1999) 20 Co Law 162 at 178.

153. Cheffins, above n 41, p 548.

154. R A Posner Economic Analysis of Law (New York: Aspen Publishers, 4th edn, 1992) p 394.

155. Above n 152, at 181.

156. [1995] BCC 911.

157. [1995] BCC 911 at 918.

158. See Re Dawson Print Group Ltd (1987) 3 BCC 322 at 326.

159. For a discussion of the use of private enforcement of public law like provisions, see above n 6.

160. The Australian regulator of companies, the Australian Securities and Investments Commission, is entitled to bring insolvent trading proceedings against directors.

161. For example, see two papers by B Collier: ‘ASIC and Insolvency-Current Activities and Future Directions in Enforcement and Policy’, paper delivered to the Insolvency Practitioners’ Association of Australia Conference, 28 May 2003, available at http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/IPAA_280503.pdf/file/IPAA_280503.pdf; and ‘The View From ASIC: A Perspective on Current Activities and Enforcement Powers’, paper delivered to the Practical Insolvency and Practice Management Conference, 15 March 2004, available at http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/PIPM_speech-140304.pdf/file/PIPM_speech_140304.pdf.

162. See Keay, above n 147.

163. See A G Anderson ‘Conflicrs of Interest: Efficiency, Fairness and Corporate Structure’ (1978) 25 UCLA LR 738 at 746.

164. L Mitchell ‘Fairness and Trust in Corporate Law’ (1993) 43 Duke LJ 425 at 446.

165. See Mitchell, above n 164, at 425.

166. N Hsieh ‘Moral Desert, Fairness and Legitimate Expectations in the Market’ (2000) 8 Journal of Political Philosophy 91 at 103. In R v IRC [1990] 1 WLR 1545 at 1569 Bingham LJ said that: ‘The doctrine of legitimate expectations is rooted in fairness.’

167. W Bratton ‘The Interpretation of Contracts Governing Corporate Debt Relationships’ (1984) 5 Cardozo LR 371 at 381–382.

168. L Mitchell ‘The Fairness Rights of Bondholders’ (1990) 65 NYULR 1165 at 1225.

169. C Mitchell ‘Leading a Life of its Own? The Roles of Reasonable Expectation in Contract Law’ (2003) 23 OJLS 639 at 642.

170. See above n 162.

171. Above n 23, at 363.

172. Above n 23, at 368.

173. For instance, see R Schulte ‘Enforcing wrongful trading as a standard of conduct for directors and a remedy for creditors: the special case of corporate insolvency’ (1999) 20 Co Law 80. But see Mokal's comment: above n 23, at 362.

174. Above n 6, p 41.

175. S Schwarcz in ‘Rethinking a Corporation's Obligations to Creditors’ (1996) 17 Cardozo LR 641 at 673.

176. ‘The Rights of Affiliated Corporations’ (1976) 43 U Chi LR 499 at 505. The remit of the Company Law Review Steering Group when it was established in 1998 was to identify ways in which creation of wealth could occur but at the same as protecting the interests of, such as creditors: Company Law Review Steering Group, above n 15, ch 5.

177. Some still hold to the theory, but clearly the vast number of scholars does not accept it.

178. See S Worthington ‘Shares and shareholders: property, power and entitlement’ (2001) 22 Co Law 258 at 263 (Part 1).

179. Above n 33, at 422

180. (1985) 3 ACLC 453.

181. (1985) 3 ACLC 453 at 459. Admittedly, the judge was possibly confusing limited liability of shareholders and the concept of separate entity, but it argued that the point is sound (see H Anderson ‘Directors’ Personal Liability to Creditors: Theory Versus Tradition’ [2003] Deakin LR 12).

182. As did Henry LJ in Re Grayan Building Senices Ltd (in liq) [1995] Ch 241 at 255.

183. Cork Report, above n 12, para 1805.

184. Sometimes referred as ‘enabling rules’ (Ramsay, above n 16, p 221; I Ayres and R Gertner ‘Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules’ (1989) 99 Yale LJ 87 at 91) or ‘gap-filling’ (Ayres and Gertner, above).

185. See the discussion in Ramsay, above n 16; J Coffee ‘The Mandatory/Enabling Balance in Corporate Law: An Essay on the Judicial role (1989) 89 Col LR 1618 and ‘No Exit?: Opting Out, the Contractual Theory of the Corporation and the Special Case of Remedies’ (1988) 53 Brook LR 919; L Bebchuk ‘The Debate on Contractual Freedom in Corporate Law’ (1989) 89 Harv LR 1395; J Gordon ‘The Mandatory structure of Corporate Law’ (1989) 89 Col LR 1549.

186. Although some contractarians such as Professor Lucian Bebchuk (above n 185) and Dr Michael Whincop (above n 113) have supported the existence of a number of mandatory rules.

187. Unlike US companies, which can move to another state if they do not like the company laws in their original home and yet stay in the same country, British companies cannot.

188. Above n 16, p 221.

189. Gordon, above n 185, at 1554.

190. A provision that is not trivial, given the definition of B Black ‘Is Corporate Law Trivial?: A Political and Economic Analysis’ (1990) 84 Nw ULR 542. See the recent decision in Exeter City AFC Ltdv Football Conference Ltd [2004] BCC 498 where it was held that the right of a member to petition pursuant to s 459 of the Companies Act 1985 could not be removed by contract.

191. It has been asserted by Professor Jack Coffee (above n 185, at 1631) that the courts are probably more likely to uphold an opt out arrangement when it relates to a common law rule, rather than one found in a statute.

192. Above n 95, at 66.

193. Above n 95, at 66.

194. See R Mokal ‘Priority as Pathology: The Pari Passu Myth’ [2001] CLJ 581.

195. The Cork Report adverted to this: above n 12, para 1797.

196. J Dabner ‘Trading Whilst Insolvent - A Case for Individual Creditor Rights Against Directors’ (1994) 17 UNSWLJ 546 at 569, and referring to T Jackson ‘Bankruptcy, Non-Bankruptcy Entitlements and Creditors’ Bargain’ (1982) 91 Yale LJ 857 at 860–868.