Corporate restructuring team co-leader James Millar authored an article for the Creditor Rights Coalition, to which he is a regular contributor, that discusses the practice of appointing “independent directors” for troubled companies, often on the eve of bankruptcy.
Millar highlights that the fundamental issue revolves around a breakdown in trust — that is, trust in the process — and that some stakeholders in the restructuring process have reached the point where they simply don’t accept that independent directors are doing their job fairly and diligently.
Millar then provides a few ideas that could address this issue. For example, he notes that some foreign jurisdictions have a court-appointed person oversee the company and its directors — but they do not displace the board or management. Millar also suggests that an automatic, fulsome and timely disclosure by independent directors in bankruptcy would help creditors ferret out misplaced allegiances.