The Financially Troubled Company

Derivative Claims Against Directors Of An Insolvent Delaware Corporation. With its 2007 decision in North American Catholic Educational Programming, Inc. v. Gheewalla, et al., 930 A.2d 92 (Del. 2007), the Delaware Supreme Court held that directors of an insolvent Delaware corporation could be sued derivatively by creditors for breaches of fiduciary duty. To read

As I have reported over the past several years, Delaware courts, including the Delaware Supreme Court, have addressed the nature of a director’s fiduciary duties when a Delaware corporation is insolvent or in the "zone of insolvency," most notably with the 2007 decision in North American Catholic Educational Programming, Inc. v. Gheewalla, et al., 930

With the economy suffering through the longest recession since the 1930s, it’s little wonder that much of the merger and acquisition ("M&A") activity these days has been focused on distressed companies. The Chrysler and General Motors cases may be the best-known examples, but Chapter 11 bankruptcy is frequently used by companies large and small to sell assets through Section

The Fall 2008 edition of the Absolute Priority newsletter, published by the Cooley Godward Kronish LLP Bankruptcy & Restructuring group, of which I am a member, has just been released. The newsletter gives updates on current developments and trends in the bankruptcy and workout area. Follow the links in this sentence to access a copy

In many Chapter 11 bankruptcy cases, unsecured creditors investigate whether a basis exists to recharacterize existing secured debt as equity. The reason? A successful challenge can turn first or second lien secured debt into "back-of-the-line" capital contributions, enabling unsecured creditors to realize a much greater recovery. A recent article by two of my Bankruptcy & Restructuring Group colleagues at Cooley Godward Kronish LLP, Ronald R.

When insolvent companies are unable to make payroll or to pay accrued vacation or other amounts owed employees, the question often arises whether directors, officers, or shareholders face personal liability for these unpaid amounts. The California Court of Appeal recently addressed that issue, examining whether particular sections of the California Labor Code, as well as section

Companies in financial trouble are often forced to liquidate their assets to pay creditors. While a Chapter 11 bankruptcy sometimes makes the most sense, other times a Chapter 7 bankruptcy is required, and in still other situations a corporate dissolution may be best. This post examines another of the options, the assignment for the benefit of creditors

For a number of years, the concept of deepening insolvency has been one of the more hotly debated issues in the insolvency arena. Two of my colleagues in the Bankruptcy & Restructuring group at Cooley Godward Kronish LLP, Michael Klein and Ronald Sussman, have written an interesting article entitled "Tide Has Turned On Deepening

This post examines a new decision from the Bankruptcy Court for the Southern District of Florida involving the enforceability of a pre-bankruptcy waiver of the automatic stay. Let’s first set the stage by taking a look at a not so uncommon fact pattern involving a real estate project in financial trouble.

The Real Estate Workout: