Protection of Creditors in case of a company's Insolvency resulting from the Fault of the Directors under Rwandan Law

Abstract

Companies all over the world carry out their day to date businesses and activities via their centralised Board of directors whose powers are delegated by the shareholders. Thus, directors are entrusted with strong powers to pursue the overall objectives of the company or shareholders. Directors are duty bound to principles of corporate governance of OECD and failure to adhere to them they are accountable to shareholders and company’s stakeholders especially once the company got insolvency. Under Rwandan law, the law governing companies provides how the company should be managed by body of directors who are appointed by the general assembly of shareholders or those who have voting shares. Directors are appointed for the purpose of acting in the best interests of company /shareholders but the problem comes when they act in contrary. It is of no doubt that when they act in contrary, they are personally liable for the damage caused. The liability can be both civil and criminal. Also, the law governing insolvency provides for the legal framework under which a company facing financial difficulties and unable to meet its financial obligations undergoes the liquidation. However, Rwandan law governing companies and law governing insolvency do not clearly provide how directors are accountable to creditors of a company that becomes insolvency as a result of the fault of its directors. Thus, this shows how creditors of companies need an effective protection against fault of directors who cause insolvency.