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Director Fiduciary Duties in an Insolvency Context

Client memorandum | March 20, 2020

With businesses focused on the impact of the novel coronavirus pandemic, in many cases attention has turned to the issue of the duties and responsibilities of directors to creditors when a corporation is financially troubled and is either approaching insolvency (the so-called “zone of insolvency”) or becomes insolvent. In this memorandum, we discuss the change in directors’ duties that occurs when a company becomes insolvent, as well as the need for directors to monitor carefully when a company may become (or, in litigation that may later be brought, may be viewed in hindsight as having become) insolvent.

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