Critical Board Issues for Financially Distressed Companies

By Sarah E. Tune and Mohsen Manesh

When a company begins experiencing financial distress that threatens its continued existence, its directors and officers must be vigilant about exercising their fiduciary duties. The company’s equity holders as well as outsiders will view decisions made during this time with particular scrutiny. Additionally, there are areas of law that attach personal liability to directors and officers; and, while risk of personal liability always exists, even in healthy firms, the potential for liability is heightened when a company is in financial distress.

Compounding the risks of personal liability, a financially distressed company may lack the resources necessary to indemnify its directors and officers, notwithstanding the indemnification agreements it may have with such individuals, and may even allow its director and officer insurance policies to lapse, because it is simply unable to pay the premiums. Continue reading…

About Joe Wallin

Joe Wallin focuses on emerging, high growth, and startup companies. Joe frequently represents companies in angel and venture financings, mergers and acquisitions, and other significant business transactions. Joe also represents investors in U.S. businesses, and provides general counsel services for companies from startup to post-public.
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