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Insolvency Law

Expert guidance on all aspects of corporate and personal insolvency

11 FEB 2011

Corporate Punishment - how should we deal with naughty companies (as opposed to naughty directors)?

The recent UK Supreme Court decision in Holland and earlier judgments on the disqualification of de facto and corporate directors raises the interesting question of corporate punishment. That is punishing companies, as opposed to punishing the directors of a company. This second type of punishment is most obviously recognisable in English law in the area of directors' disqualification for unfitness. Although some would say that the jurisdiction does not exist for punishment goals, but for public public protection outcomes. This director punishment (or public protection) area has most recently been critically examined in Dr Richard William's new book entitled: "Disqualification Undertakings: Law, Policy and Practice" (Jordans, 2011).

But how should we deal with companies that deserve punishment? In his huge 1981 article on the subject (Coffee, J. 'No Soul to Damn: No Body to Kick": An Unscandalized Inquiry into the Problem of Corporate Punishment (1981) 79 Mich. L. Rev, 386) Columbia Law School's Adolf Berle Professor of Law, Professor John C Coffee Jr, offers some insightful comments that have perhaps been missed, particularly on this side of the Atlantic. If Parliament does look into the area of de facto director culpability in due course, as the Lords Walker and Collins noted in Holland, Parliament may also discuss or examine how corporate directors should be regulated, and punished, so as to provide much needed guidance in this allied area.

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