In light of the sustained downturn in the American and global economy, and with the number and magnitude of corporate bankruptcy filings reaching historic highs, the time has never been riper for the management of corporations operating in a debt restructuring mode or in or on the brink of bankruptcy to revisit their fiduciary obligations to not only the corporation and its shareholders, but to their debtholder and other creditor constituencies as well.
Directors of such financially distressed companies must meet the challenge of discharging their fiduciary obligations to an expanded class of beneficiaries who have conflicting and competing interests – for example, shareholders may opt for riskier transactions in an attempt to save the floundering company, whereas their debtholder counterparts, who receive no additional upside from such transactions, may opt for liquidation – while simultaneously trying to return their companies to financial viability.
