Law Commons^™

Corporate Governance, Director Liability, And Good Faith, Elizabeth Nowicki

Elizabeth Nowicki

Corporate directors are obligated to act “in good faith,” and directors face personal monetary liability to their shareholders for acts “not in good faith.” Yet no modern court has imposed liability accordingly. Every time the issue of a director’s good faith comes up in court, the court forces the complaining shareholder to prove that her directors acted affirmatively in bad faith as opposed to merely in the absence of good faith. The judiciary completely misses the point that acts lacking good faith are not always the same as acts affirmatively taken in bad faith. A director can act in the …

Fiduciary Duties In Distressed Corporations: Second-Generation Issues, Royce De R. Barondes

Faculty Publications

This paper examines variations in corporate fiduciary duties arising from financial distress. This paper argues whether there is an affirmatively enforceable duty under the principles of Credit Lyonnais is not moot, because, inter alia, the availability of aiding and abetting liability for breach of fiduciary duty will give rise to a greater set of potentially liable defendants (aiding and abetting a fraudulent transfer typically not separately giving rise to liability), allowing a court to reverse some outcomes that would otherwise obtain under the in pari delicto doctrine and the Wagoner rule, and will expand the remedies available. This paper argues …

Directors' Duties In Failing Firms, Kelli A. Alces, Larry E. Ribstein

Scholarly Publications

Despite many cases with seemingly contrary dicta, corporate directors of failing firms do not have special duties to creditors. This follows from the nature of fiduciary duties and the business judgment rule. Under the business judgment rule, the directors have broad discretion to decide what to do and in whose interests to act. There is some authority for a limited creditor right to sue on behalf of the corporation to enforce this duty. However, any such right does not make the duty one owed to creditors. The creditors individually may sue the corporation for breach of specific contractual, tort, and …

Director Compliance With Elusive Fiduciary Duties In A Climate Of Corporate Governance Reform, Nadelle Grossman

Fordham Journal of Corporate & Financial Law

No abstract provided.

Tackling The “Evils” Of Interlocking Directorates In Healthcare Nonprofits, Nicole Huberfeld

Law Faculty Scholarly Articles

The nonprofit sector and matters of nonprofit governance have been in the national spotlight much of late. One area of heightened interest is directors of healthcare entities regularly serving on the board of more than one healthcare organization. Even when board membership of related entities is relatively independent, one corporation's business plan frequently is affected (or even controlled) by the business needs of a separately incorporated parent, affiliate, or other related organization. Very little case law addresses "interlocking" directorates for nonprofit board members, and the case law that does exist tends to address narrow, fact-based state law interpretive issues rather …

Gap Filling In The Zone Of Insolvency, Frederick Tung

Faculty Scholarship

This paper was prepared for a symposium - Twilight in the Zone of Insolvency: Fiduciary Duty and the Creditors of Troubled Companies - at the University of Maryland School of Law.

Attacks on shareholder primacy have come from numerous quarters, arguing for expansion of the class of beneficiaries of directors' fiduciary duties. Regarding duties to creditors - the focus of this symposium - a long line of cases has recognized that once a firm is insolvent, creditors should be the primary beneficiaries of directors' fiduciary duties. Then in 1991, Chancellor Allen's famous discussion in Credit Lyonnais identified a special vicinity …