The plaintiff, Horng Technical Enterprise Co., LTD (“Horng”), was a Taiwanese corporation that manufactured computer accessories. Horng Technical Enterprise Co., LTD v. Sakar International, Inc., No. 10-3648 (3d Cir. June 23, 2011). The defendant, Sakar International, Inc.
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.
Delaware has long been the bellwether for law concerning the duties that corporate officers and directors owe to a company and its creditors, and Florida courts often look to Delaware cases and compelling authority in evaluating disputes alleging breaches of fiduciary duties by directors or officers. A recent significant Delaware opinion has helped clarify what duties officers and directors owe to whom and when. In Quadrant Structured Products Co. v. Vertin, 2015 WL 2062115 *1 (Del. Ch.
Since at least the Delaware Supreme Court’s 2007 landmark decision in N. Am. Catholic Educ. Programming Found., Inc. v. Gheewalla, 930 A.2d 92, 101 (Del.
More Clarity for Delaware Directors When Considering Restructuring Transactions
SUMMARY
In Quadrant Structured Products Co., Ltd. v. Vertin (May 4, 2015) (“Quadrant”), the Delaware Court of Chancery confirms – again – that ordinary corporate fiduciary duties govern the conduct of directors of an insolvent corporation, rather than a special duty to creditors. The Court also clarifies the circumstances in which creditors may have derivative standing to enforce those fiduciary duties on behalf of an insolvent corporation.
In Quadrant Structured Products Company, Ltd. v. Vertin, the Delaware Court of Chancery made two key rulings concerning the rights of creditors to bring derivative lawsuits against corporate directors.1 First, the court held that there is no continuous insolvency requirement during the pendency of the lawsuit.
A just-issued Court of Chancery decision clarifies, and possibly expands, creditors' rights. In 2007, the Delaware Supreme Court ruled that a corporation's creditors may sue its board of directors for violating its fiduciary duties, but only after the corporation became insolvent, in North American Catholic Educational Programming Foundation v. Gheewalla, 930 A.2d 92 (Del. 2007). While creditors continued to be unable to sue directly, Gheewalla did permit them to file derivative suits in those circumstances.
In Quadrant Structured Products Co. v. Vertin, 2015 WL 2062115 (Del. Ch. May 4, 2015), the Delaware Court of Chancery (Vice Chancellor J. Travis Laster) announced a bright-line standard governing the threshold inquiry of when a creditor can maintain a derivative suit against directors for breach of fiduciary duty. The court held that a creditor need only establish that the company was balance sheet insolvent at the time the suit was filed and that the creditor’s standing will not be extinguished if the company rides back into solvency during the litigation.
This week we present for your consideration two cases: (a) an Alabama Court of Civil Appeals decision setting aside a default judgment against a car dealership because the defendant’s delay in answering complaint was not unreasonable when defendants tendered complaint to attorney when served; and (b) an Eleventh Circuit decision regarding the classification of promissory notes from an involvement developer as senior debt in a bankruptcy.
The Small Business, Enterprise and Employment Act (the “Act”) became one of the last acts of the current Parliament when it received Royal Asset on 26 March 2015.