Corporate insolvency practitioners: Ethics and fiduciary duties

Abstract

The Corporate Insolvency Practitioner (CIP) forms an integral part in the success and outcome of any Insolvency Procedure. The exact nature of the role played by the CIP depends on a number of factors, including the type of proceedings. In most jurisdictions, where an element of management displacement occurs during the proceedings, the CIP will be regarded as a fiduciary. The word ‘fiduciary’ is, however, not definitive of a single class of relationships to which a fixed set of rules and principles apply. It is necessary to determine the rules that govern each class of fiduciary relationship. This chapter examines the fiduciary nature of the CIP’s role and the fiduciary duties often associated with his/her office as well as the biggest practical stumbling blocks. The role of the rescue professional as a CIP is particularly complex as it involves the consideration of issues that involve corporate and company law as well as insolvency law. The beneficiaries of the fiduciary duties of CIPs are also analysed with reference to the main Insolvency Law theories and a new theory of Insolvency Law is offered: the Enlightened Creditor Value Approach. It soon becomes apparent that the role of the CIP and his/her fiduciary duties are numerous and complex. The efficacy of a well drafted code of ethics as guidance is considered as a possible aide in the quest for appropriate conduct by the CIP.