Client Alert

General Counsel Beware: Bankruptcy Trustees May Look To You When Objectionable Activities Are Ignored

May 05, 2008

Thomas L. Kent and Mary P. Miras

In these increasingly financially troubled times, the Delaware bankruptcy court's decision in In re World Health Alternatives, Inc. should serve as a cautionary tale for directors and officers generally, and general counsel in particular. While the decision does not expand the scope of liability for officers and directors, including general counsel, it is a reminder that directors and officers have fiduciary duties to the corporation to act in the best interests of the corporation. Ignoring wasteful expenditures and other wrongful acts, especially when the corporation may be close to insolvency, may lead to personal liability when bankruptcy trustees and other parties later look to corporate officers, including the general counsel, to improve their bankruptcy recoveries.

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Global Finance

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