Professional Documents
Culture Documents
DIRECTORS IN FINANCIALY
TROUBLED COMPANIES
○ Defined ○ Mechanics
○ Select Issues
ZONE OF INSOLVENCY
▪ Unlawful Dividend
▪ Fraudulent Conveyance
▪ Breach of Contract
“The general rule is that [officers and] directors do not owe duties beyond
the relevant contractual terms. No direct claim for breach of fiduciary
duties may be asserted by creditors of a solvent corporation that is
operating in the zone of insolvency. When a corporation is insolvent,
however, its creditors take the place of shareholders as the residual
beneficiaries of any increase in value. Consequently, the creditors of an
insolvent corporation have standing to maintain derivative claims on
behalf of the corporation for breach of fiduciary duties.” National
American Catholic Educational Programming Foundation, inc. v.
Gheewalla, 930 A.2d 92 (Del. 2007).
DEEPENING INSOLVENCY
▪ In Pari Delecto
○ Plaintiff That Participated in Wrongdoing May Not Recover
Damages Arising From Such Wrongdoing
D&O INSURANCE
▪ Mechanics
○ Engage Counsel
○ Diminishing Coverage
COVERAGE WATERFALL
▪ Indemnification in Bankruptcy
○ Seek an Order Authorizing Continuing Indemnification
▪ Insured v. Insured
○ Sample Language: “The Insurer shall not be liable for any Loss
in connection with any Claim brought by, or on behalf of
Insured, except and to the extent that such claim is by, or on
behalf of a debtor-in-possession, any bankruptcy trustee, litigation
trustee, examiner, creditors committee, equity committee,
administrator or liquidator, or any comparable authority (or any
assignee of the foregoing parties).”
ENDORSEMENTS