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Banks and other institutional lenders are all too familiar with a recurring commercial reality. A company incurs substantial indebtedness, or judgment is entered against it, only for its assets to disappear shortly thereafter. Bank accounts are emptied, receivables diverted, valuable assets transferred to related entities, and corporate value systematically stripped by those controlling the company. By the time creditors seek to enforce their rights, there is often nothing left to execute against. The company has become little more than a shell, while any ensuing insolvency process is frequently protracted, underfunded or, in some instances, influenced by the very persons responsible for the dissipation. Asset-stripping of this nature presents one of the greatest threats to effective creditor protection and the integrity of modern insolvency regimes. It also raises a fundamental question at the intersection of company law, insolvency law and the law of obligations: where the same misconduct gives rise to both a corporate cause of action and a personal loss to a creditor, does the existence of the company’s claim extinguish or bar the creditor’s independent cause of action?
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