The Supreme Court of Delaware concluded last week that a creditor lacks standing to sue corporate officers and directors for breach of fiduciary duties:
[W]e hold that the creditors of a Delaware corporation that is either insolvent or in the zone of insolvency have no right, as a matter of law, to assert direct claims for breach of fiduciary duty against the corporation’s directors.
North Am. Catholic Ed. Programming Found., Inc. v. Gheewalla, No. 521, 2006 (May 17, 2007). The court did reaffirm that creditors of an actually insolvent corporation may assert derivative claims against Ds and Os for fiduciary breaches but held that the fact of insolvency doesn’t entitle them to pursue direct claims in their own right.
Barry Barnett
