Directors’ Fiduciary Duties in the Zone of Insolvency and Actual Insolvency: To Whom, What, and When?

15 Pages Posted: 27 May 2011 Last revised: 4 Jun 2011

Date Written: May 23, 2011

Abstract

The Delaware Supreme Court recently held that corporate directors’ fiduciary duties do not expand beyond the enterprise and shareholders to encompass creditors. This applies both when the corporation is in the zone of insolvency and when actually insolvent. Thus, should corporations take on more risk to produce value for shareholders to the potential detriment of creditors? Alternatively, do the directors’ duties to the enterprise require taking less risk? Finally, is there an overriding federal fiduciary duty to creditors in the Bankruptcy Code? This Note analyzes and proposes answers to these questions.

Suggested Citation

Patrone, Michael R., Directors’ Fiduciary Duties in the Zone of Insolvency and Actual Insolvency: To Whom, What, and When? (May 23, 2011). Available at SSRN: https://ssrn.com/abstract=1851103 or http://dx.doi.org/10.2139/ssrn.1851103

Michael R. Patrone (Contact Author)

Harvard Law School ( email )

Cambridge, MA
United States

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