Document Type

Article

Publication Date

2007

Publication Title

Journal of Business & Technology Law

Publication Title (Abbreviation)

J. Bus. &Tech. L.

Volume

1

Issue

2

First Page

529

Last Page

551

Abstract

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 statutory duties, particularly on account of fraudulent conveyances. But the creditors are not owed general fiduciary protection even if they are subject to a special risk of abuse in failing firms.

Rights

© 2007 Kelli A. Alces and Larry E. Ribstein

Comments

First published in Journal of Business and Technology Law.

Faculty Biography

http://www.law.fsu.edu/faculty-staff/kelli-alces-williams

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