On June 23, 2006, the jurisdiction that invented the “zone of insolvency” delivered its latest lesson on the fiduciary duties of directors and officers of insolvent companies. The Delaware Bankruptcy Court, in In re Scott Acquisition Corp., ___ B.R. at ____, 2006 WL 1731277 (Bankr. D.Del. 2006), ruled that directors and officers of insolvent subsidiary companies owe fiduciary duties to both its creditors and the subsidiary itself. Before this, leading cases on this issue held that fiduciary duties were owed only to creditors and the single-shareholder, parent companies. Though the decision stands on some firm legal ground, it is sure to create more uncertainty and doubt in the boardroom.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]