Over the past few years, a number of bankruptcy and other federal courts have held that plaintiffs, often bankruptcy trustees or other bankruptcy estate representatives, could pursue a cause of action against a corporation’s directors and others for "deepening insolvency." What has made a deepening insolvency claim so attractive to plaintiffs and troubling to defendants
zone of insolvency
Directors Of Insolvent Corporations: Duties And Protections
By Bob Eisenbach on
The fiduciary duties that directors owe a Delaware corporation and its shareholders are generally held to expand to include the interests of creditors when the company is insolvent or in the "zone of insolvency." A hot topic among directors, particularly those serving on boards of troubled companies, is how best to meet their fiduciary duties…