An appeal that clarified when directors of a struggling company must begin weighing creditor interests as insolvency becomes likely.
What was at stake
The trustee alleged that the directors of a failed freight business had paid themselves bonuses in the months before the bankruptcy filing.
How we ran it
The bankruptcy court dismissed the claims on the pleadings. We appealed on the question of when the directors' duties shifted.
The outcome
The court of appeals reversed and returned the case for trial on the fiduciary duty claims.
The case later resolved on terms that returned a meaningful share of the payments to the estate.
The turning point
The record showed the board had been told in writing that the company could not meet its obligations as they came due.
The lesson
Directors who see insolvency coming need to act on that knowledge. Board minutes written at the time will be read later by a trustee.
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