Is the Price Right? Applying Fiduciary Duties to Bankruptcy Blocking Rights

What was once viewed as an inviolable federal public policy has been weakening in recent years, as courts across the U.S. have vigorously begun to protect the contractual rights of shareholders to block a debtor from filing a bankruptcy petition. While cases addressing blocking provisions in situations involving shareholders who are also creditors have previously been addressed, three recent transcript rulings have addressed these provisions in the context of the rights of 100 percent shareholders. 

In reaching different conclusions based on similar facts, these rulings have created confusion, which potential debtors and their council must navigate in evaluating how a company's bankruptcy filing can be validly authorized. This article discusses these rulings and the ever-evolving interpretation of federal public policy. 

Click here to continue reading. 

About Potter Anderson

Potter Anderson & Corroon LLP is one of the largest and most highly regarded Delaware law firms, providing legal services to regional, national, and international clients. With more than 100 attorneys, the firm centers its practice on corporate and alternative entity law and litigation, commercial litigation, bankruptcy, intellectual property, labor and employment, and real estate.