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Fiduciary Principles In Bankruptcy And Insolvency, John A.E. Pottow

Book Chapters

This chapter examines fiduciary duties in bankruptcy and insolvency, focusing on the bankruptcy trustee’s duties, which are triggered by virtue of appointment in a case. It first provides a background on bankruptcy law in order to elucidate the doctrines and rules affecting fiduciary responsibilities in bankruptcy, citing a number of relevant provisions in the Bankruptcy Code. It then considers the fiduciary, non-fiduciary, and anti-fiduciary obligations of the trustee under the Bankruptcy Code before discussing the fiduciary duties of care and loyalty. In particular, it highlights bankruptcy-related issues raised by the duty of loyalty with respect to secured creditors, priority unsecured …

Fiduciary Principles In Bankruptcy And Insolvency, John A. E. Pottow

Book Chapters

This chapter examines fiduciary duties in bankruptcy and insolvency, focusing on the bankruptcy trustee’s duties, which are triggered by virtue of appointment in a case. It first provides a background on bankruptcy law in order to elucidate the doctrines and rules affecting fiduciary responsibilities in bankruptcy, citing a number of relevant provisions in the Bankruptcy Code. It then considers the fiduciary, non-fiduciary, and anti-fiduciary obligations of the trustee under the Bankruptcy Code before discussing the fiduciary duties of care and loyalty. In particular, it highlights bankruptcy-related issues raised by the duty of loyalty with respect to secured creditors, priority unsecured …

The “Prudent Person” Standard In Esop Breach Of Duty Of Care Claims, Zien Halwani

Bankruptcy Research Library

(Excerpt)

Employee stock ownership plans (ESOPs) are a form of statutory pension program designed to invest employee retirement assets in the stock of the employer. Under the Employment Retirement and Income Securities Act of 1974 (“ERISA”), ESOP fiduciaries must discharge their duties “with the care, skill, prudence and diligence under the circumstances prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.” This is to say that under ERISA, ESOP fiduciaries are liable for breaches of duty of care, …

The Expressive Function Of Directors’ Duties To Creditors, Jonathan C. Lipson

All Faculty Scholarship

This Article offers an explanation of the “doctrine” of directors’ duties to creditors. Courts frequently say—but rarely hold—that corporate directors owe duties to or for the benefit of corporate creditors when the corporation is in distress. These cases are puzzling for at least two reasons. First, they link fiduciary duty to priority in right of payment, effectively treating creditors as if they were shareholders, at least for certain purposes. But this ignores the fact that priority is a complex and volatile concept. Moreover, contract and other rights at law usually protect creditors, even (especially) when a firm is distressed. It …

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 …