Quistclose Trusts from a Corporate Insolvency Perspective: A Positive and Normative Analysis

Leading cases show Quistclose trusts being used by companies nearing insolvency. Their use in this context raises serious normative problems: it may prefer the beneficiary to the company’s other creditors, and creates a misleading impression that trust funds are in fact free of trust. Building on the emergent normative literature on Quistclose trusts, we first examine which Quistclose trusts are currently allowed under company law and the law of corporate insolvency. We then discuss the normative question which Quistclose trusts should be allowed, given the principles of these branches of the law.

[From https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4190631]