From the Harvard Law School Corporate Governance Blog, an article by Marshall Huebner and Hugh McCullough of Davis, Polk & Wardwell entitled The Fiduciary Duties of Directors of Troubled U.S. Companies: Emerging Clarity. The summary is below, and the article can be accessed by clicking here.
For many years, there was a diversity of opinion — including judicial opinion — with respect to various issues connected to the duties of directors and officers in the troubled company situation. Can they be sued directly by creditors? Does the business judgment rule apply to protect them? Is there a tort called “deepening insolvency?” To whom are duties owed? Can directors and officers continue to take (prudent) risks to maximize the value of the enterprise?