A recent Delaware Supreme Court decision may have undermined cases against directors and officers of companies for actions they take just before they file for bankruptcy, such as increasing the company’s debt or signing major contracts with creditors.
The court ruled in May that creditors of a Delaware corporation that is insolvent or in the so-called “zone of insolvency” have no right to assert direct claims for breach of fiduciary duty against its directors. Some lawyers believe the decision eliminates the threat of suits that seek to recover from directors for actions they took shortly before bankruptcy.
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