Controlling tunnelling through lending arrangements: the disciplining effect of lending arrangements on value-diversion, its limits and implications

Gözlügöl, Alperen Afşin (2022) Controlling tunnelling through lending arrangements: the disciplining effect of lending arrangements on value-diversion, its limits and implications. European Business Law Review, 33 (Issue 1). pp. 125-174. ISSN 0959-6941

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Abstract

The practices of corporate controllers to divert company value to themselves at the expense of (minority) shareholders and creditors (tunnelling) present a continuing challenge for lawmakers to address. While there is a variety of ways to control selfdealing in public companies, one less studied and appreciated lever against valuediversion is the role of lenders of such companies. This article examines the lending arrangements and common contractual provisions (undertakings, (non-)financial covenants, restrictions), and argues that such arrangements have considerable potential to monitor, deter and restrain value-diversion via self-dealing in the debtor companies. Likely limits to such a potential, and various important factors are also examined. The study concludes with possible implications of such findings.

Item Type:	Article
Divisions:	LSE Law
Subjects:	K Law H Social Sciences > HG Finance
Date Deposited:	17 May 2024 14:09
Last Modified:	27 Oct 2024 02:24
URI:	http://eprints.lse.ac.uk/id/eprint/123517

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