Deepening Insolvency Claims In Disguise

Law360, New York (May 14, 2008, 12:00 AM EDT) -- Directors and officers of troubled companies are already keenly cognizant of their potential liability for any breaches of fiduciary duty, negligence and fraud.

In the June 2006 issue of Insolvency Notes, we discussed the controversy surrounding another basis for potential liability of directors and officers — "deepening insolvency."

The theory of deepening insolvency is that recovery may be had from wrongdoers for an injury to a corporation caused by the fraudulent or negligent expansion of corporate debt and prolongation of corporate life.

For example, a deepening...
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