Companies of all sizes, new or mature, sometimes go out of business. “California Or Bust” is legendary in American history, but “bust” sometimes happens despite everyone’s best efforts. If you are an officer or director of a company that is heading toward its final days, there is a critical wind-down task: final paychecks. The simple (but widely ignored) fact is that officers and directors can be held personally liable for unpaid wages under federal and state law in certain circumstances, and the entity’s bankruptcy status often has no effect on individual liability.
A key part of the international scheme landscape
The use of creditors' schemes of arrangement is on the rise in Australia (as we discussed in our previous article - Update on Creditors Schemes of Arrangement in Australia). Along the way the Australian courts have made valuable contributions to international scheme jurisprudence. In this article we look at some of these contributions and then explore how Australian law might be further developed to remain a leading jurisdiction for creditors' schemes.
Except where otherwise noted, this paper is current as of September, 2011 and provides preliminary information on Canadian and British Columbia legal matters to assist you in establishing a business in British Columbia and provides general guidance only.
There are limits on the ability of shareholders to ratify dubious acts of the directors – it cannot be effective if the interests of existing creditors have become paramount (so as to subordinate the duties owed to shareholders) and are prejudiced. This is particularly relevant to upstream guarantees. On 6th February, the Court of Appeal gave its 51-page judgment in BTI 2014 LLC v Sequana S.A which is relevant to exactly this point.
In a decision of first impression entered on June 3, 2020, a Chicago bankruptcy court (“Court”) held that a restaurant tenant was excused from paying a significant portion of its rent under the force majeure provisions of its lease because of the governor’s executive order prohibiting in-house dining during the COVID-19 pandemic.[1] This decision is highly significant for landlords and tenants whose ability to service their clients has similarly been restricted by government orders.
The U.S. District Court for the Southern District of New York, on April 23, 2019, denied the litigation trustee’s motion for leave to file a sixth amended complaint that would have asserted constructive fraudulent transfer claims against 5,000 Tribune Company (“Tribune”) shareholders. In re Tribune Co. Fraudulent Conveyance Litigation, 2019 WL 1771786 (S.D.N.Y. April 23, 2019). The safe harbor of Bankruptcy Code (“Code”) § 546(e) barred the trustee’s proposed claims, held the court. Id., at * 12.
Fifth Circuit Rejects Breach of Fiduciary Duty and Fraudulent Transfer Claims
By Michael L. Cook*
THE BANKING LAW JOURNAL
First Circuit Affirms Dismissal of Fraudulent Transfer and Fiduciary Duty Claims
Michael L. Cook* This article discusses a recent U.S. Court of Appeals for the First Circuit decision holding that the debt-financed purchase of a business was not a fraudulent transfer and did not violate the fiduciary duty of the company's directors.
The U.S. Court of Appeals for the Second Circuit recently dismissed a corporate debtor’s attempt to subordinate its former corporate parent’s contract damage claim on the ground that it was a securities fraud claim. CIT Group Inc. v. Tyco Int’l., Inc. (In re CIT Group Inc.), 2012 WL 3854887 (2d Cir. Sept. 6, 2012), affirming 460 B.R. 633 (Bankr. S.D.N.Y. 2011).
The Delaware Supreme Court affirmed on May 18, 2007, the Delaware Chancery Court’s dismissal of a breach of fiduciary duty suit brought by a creditor against certain directors of Clearwire Holdings Inc. North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, C.A. No. 1456-N (May 18, 2007).
Whether a creditor may assert a direct claim against corporate directors for breach of fiduciary duty when the corporation is insolvent or in the so-called “zone of insolvency.”
Answer: No.