duties of directors to creditors

The current disruption to normal business operations across the country means that many businesses will soon be under significant financial pressure, if they are not there already. As their companies edge toward insolvency, directors are going to have to make significant decisions about the companies and their operations. Boards may be concerned, as they make critical and difficult decisions, that creditors or others may later attempt to claim that they violated their legal duties.  This concern in turn leads to the question about exactly what duties directors face as their companies approach insolvency.
Continue Reading Cash-Crunched Companies Face Insolvency; Will Directors Face Claims?

seal delA question that frequently recurs is whether or not directors of insolvent companies have fiduciary duties to creditors. Creditors often attempt to argue that as companies move into the “zone of insolvency,” directors’ duties move from the company’s shareholders to the company’s creditors. While courts have discredited this theory, creditors nevertheless seek to raise this