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Article 9 of the Uniform Commercial Code, adopted in all fifty states plus the District of Columbia with relatively few variations, sets out, among other things, the rules to be followed when obtaining a security interest in personal property collateral to secure a loan. The basic premise of Article 9 is that if the lender follows the rules, it should be protected against third parties, including other creditors or a bankruptcy trustee, who would seek to challenge the lender’s security interest or the priority of the security interest.

Continue Reading UCC Financing Statements and Debtor Name Errors: The Litigation Continues

Periodically courts remind corporate directors that their decisions to act or to refrain from acting during the course of managing the affairs of a corporation are not without limitations.  It is well established that corporate directors owe fiduciary duties, and more specifically, a duty of care and a duty of loyalty to corporate shareholders.  Those duties should always be at the front of mind of every director when any action or inaction is contemplated, but in particular, when addressing challenging issues facing the corporation.  Directors are afforded wide latitude under state corporate law, and by the courts interpreting those laws, to make decisions regarding the management of a corporation that are appropriately within the scope of the directors’ business judgement.  But courts, and in particular bankruptcy courts with an interest in protecting a number of different stakeholders, are not shy about reminding corporate directors that the scope of protection provided by the business judgment rule is not unlimited.  Such is the case with In re Sportco Holdings, Inc., et al., 2021 WL 4823513 (Bankr. D. Del.), a recent decision by the Bankruptcy Court for the District of Delaware.

Continue Reading Corporate Directors’ Exposure to Breach of Fiduciary Duty Claims