The Curious Case Of Allied Systems Holdings

Law360, New York (August 9, 2013, 9:38 AM EDT) -- It is not unusual in any bankruptcy proceeding to see the official committee of unsecured creditors bring derivative actions against current and former officers and directors of a company for alleged breaches of fiduciary duties. Before doing so, however, the committee must obtain permission from the court because the causes of action belong to the debtor, which has the right to bring those claims itself. If the debtor refuses to bring those claims, or if doing so would create conflicts of interest, courts will generally give the committee permission to bring the claims on behalf of the debtor's estate. The committee then steps into the shoes of the debtor for purposes of bringing those actions....

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