Creditor Protection in Succession Law: a Comparative Analysis

The transfer of the deceased's debts is a common consequence that arises from the phenomenon of succession in both civil and common law legal systems. In this respect, a number of conflicting interests are at stake: namely, the interest of the beneficiaries that need to be balanced against the interests of the different groups of creditors (the ones of the estate and those of the beneficiaries). Common law legal systems are generally considered as the most creditor friendly, for beneficiaries only receive the residue once the estate is fully wound up. By contrast, civil law legal systems are characterised by the dogma of fusion of patrimonies, where the estate is fused with the beneficiary's patrimony. Taking these aspects into account, the article analyses how creditors’ interests are protected in the most representative European succession laws, with a view to identifying the merits and shortcomings of each of these models.

Creditor Protection and Divisions – Did the CJEU Get It Right?

The CJEU’s I.G.I. decision deals with an important aspect of creditor protection in divisions. The Court holds that the actio pauliana under Italian law may be applied to divisions, notwithstanding that such a protective measure is not foreseen in art. 146 and 153 Directive 2017/1132/EU. We argue that the Directive’s ex post protective measures should be understood as fully harmonizing provisions. The decision fails to strike the right balance between the interests of all relevant stakeholders involved, especially between different groups of creditors, and unduly impairs legal certainty. However, if one takes the decision as a basis, the judgment gives Member States considerable room to introduce or maintain additional safeguards in their national legal systems. We show that national legislators should not give in to this temptation, neither for domestic nor for cross-border divisions.

Creditor rights, monetary policy, financial crisis, and trade credit

This article analyses how creditor rights affect the trade credit channel of monetary policy. We also aim to test whether these effects were conditioned by the global financial crisis of 2008. Using a sample of 15,356 firms from 29 countries (2001–2017), we found that in normal times or in countries not very severely affected by the financial crisis, trade credit receivables increase during monetary restrictions. Moreover, this increase is less pronounced as creditor protection strengthens. In countries strongly affected by the financial crisis, however, trade credit receivables do not react or even decrease after monetary expansions, regardless of the degree of creditor protection. Furthermore, the results of trade credit payables and net trade credit are not conclusive. JEL CLASSIFICATION: E52; K22; G32

Does Greater Creditor Protection Affect Firm Borrowings? Evidence from IBC

The Insolvency and Bankruptcy Code (IBC) in India ushered in a new era of creditor-in-control regime with an in-built mechanism for time-bound resolution. This article examines the impact of the Code on firm borrowings and cost of funds. Using firm-level data on 4,531 firms for the period 2012–2018, we find that implementation of IBC has had many desirable consequences from a policy perspective. It helped in deleveraging of firms as their reliance on borrowings—whether long-term or short-term—declined. Further analysis suggests that this is especially true for weak and large firms. The stronger creditor protection is, thus, a step in the direction of reducing the burden on banks and further market deepening. JEL Classification: G32, G33, G38, D22, O16

7. Creditors

Because of limited liability, creditor protection has always been a feature of company law. Large creditors can contract ex ante for customised protection and the law facilitates this in various ways, notably by the creation of the floating charge. Non-adjusting creditors require the protection of mandatory rules, at least in some situations. Creditor protection in relation to companies in the vicinity of insolvency is now well established, not only through ‘wrongful trading’ but also via transaction invalidity rules and directors’ disqualification. For going-concern companies the emphasis is on rules restricting the shifting assets to shareholders via distributions and associated rules relating to the maintenance of capital.

Creditors

Because of limited liability, creditor protection has always been a feature of company law. Large creditors can contract ex ante for customised protection and the law facilitates this in various ways, notably by the creation of the floating charge. Non-adjusting creditors require the protection of mandatory rules, at least in some situations. Creditor protection in relation to companies in the vicinity of insolvency is now well established, not only through ‘wrongful trading’ but also via transaction invalidity rules and directors’ disqualification. For going-concern companies the emphasis is on rules restricting the shifting assets to shareholders via distributions and associated rules relating to the maintenance of capital.