All too often the task of procuring and renewing D&O insurance at a portfolio company is assigned to the portfolio company’s CFO or Controller, who employs an insurance broker to find the best price for the amount of coverage deemed appropriate by the broker. When such insurance is procured and thereafter renewed, the CFO/Controller simply reports to the board the fact of the procurement/renewal and few questions about the terms of coverage are discussed at the board level. This can be a big mistake.

The Delaware Court of Chancery recently issued an opinion in Quadrant Structured Products Company¹that addresses creditors’ rights to bring derivative lawsuits against directors and officers of a corporation.  The Court held that Delaware law does not impose a continuous insolvency requirement and that the “traditional balance sheet test” is the appropriate test for determining solvency.  The opinion also provides a roadmap on the current landscape under Delaware law for analyzing breach of fiduciary duty claims. 

The senior secured note holders recently lost their appeal of the bankruptcy court's decision confirming Momentive's chapter 11 plan.¹