Independent Director Investigations Can Benefit Creditors

Law360 (July 24, 2019, 3:55 PM EDT) -- Investigations conducted by independent directors[1] of distressed companies have become common in recent years. Some commentators view these “internal” investigations as infringing on the role of unsecured creditors’ committees, which had historically reviewed and analyzed prepetition conduct of a debtor and the debtor’s management/ownership for potential causes of action. Undoubtedly, there is often friction between independent directors and creditors’ committees regarding the investigation (and related settlements).

However, there are advantages to independent director investigations, particularly in the current bankruptcy environment, where speed to exit is paramount. These advantages can also serve to benefit unsecured creditors. This article reviews some of the...

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