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Directors & Officers: Risk and Responsibilities When Acting for a Troubled Company

Pressures Continue to Grow in the Ag, Logistics Industries

Engaged, experienced management and board members can make a world of difference when implementing a turnaround or maximizing value for stakeholders. Where directors and officers are not familiar with restructurings or lack an understanding of their roles and personal responsibilities, both the board and management will lean heavily on restructuring professionals to not only protect the restructuring, but also minimize their personal exposure. This month’s issue highlights the importance of careful planning to ensure that directors and officers can focus on the end goal of improving the corporation for the benefit of stakeholders and the important role of restructuring advisors in assisting the board and management.

Recognizing many of today’s restructurings have implications across the globe, in this issue, we asked authors in various jurisdictions to comment on the roles, responsibilities, and risks facing directors and officers of financially troubled companies. The authors offer practical advice about the liabilities facing directors and officers in their jurisdictions and provide suggestions not only about protecting directors and officers from liability, but also improving the function and interaction of these key parties.

To start, Isaac Lee of Ankura and William Schumacher of Winthrop & Weinstine, P.A., offer some advice for companies considering outside help in the form of a chief restructuring officer. These two note that a CRO can support existing management and function as a crucial bridge between stakeholders—particularly between the board and management—when the CRO is a consensus builder with a clearly defined role within the business.

On the other side of the globe, similar director and officer considerations apply, but they follow different statutory and practical frameworks. Cameron Belyea, Liz Humphry, and Anna Casellas of Clayton Utz discuss the duties of directors of a failing enterprise in Australia and the availability of a safe harbor for directors who are undertaking a turnaround plan in certain circumstances.

Next, Justin Ellis, Sara Margolis, and Ryan Yeh of MoloLamken LLP provide an update on the risks the directors in the U.S. face when making hard decisions when refinancing in the face of insolvency. The authors explore how recent cases illuminate key lessons for directors and officers who are exploring, negotiating, or defending liability management transactions that may pit groups of creditors against each other.

Our other authors offer insights on managing risk through instituting formal governance measures or controls. Michael A. Cohen of Stretto and Jeff Gleit of ArentFox Schiff examine the benefits of appointing an independent director and note that appointment earlier rather than later can benefit a struggling company. They also discuss the necessary qualifications for an independent director and suggest some tasks that can be delegated to the independent director within a restructuring process.

In this issue’s final feature, Monique Sassi of Cassels explains the unique considerations facing directors and officers in Canada. Directors and officers have both statutory and common law obligations in Canada, and incentivizing the board and management to assist in the restructuring may require applying for additional relief from court or structuring transactions in a way that minimizes potential personal liability.

Natalie Levine

Natalie E. Levine


Natalie Levine is a partner in the Restructuring & Insolvency Group at Cassels. Her strength is in working with U.S.-based clients to help them understand the challenges of the Canadian insolvency landscape and developing solutions in complex proceedings. Her practice focuses on corporate restructurings, with an emphasis on debtors, DIP lenders, and committees in cross-border proceedings. Levine’s restructuring matters encompass a variety of industries, including oil and gas, retail, manufacturing, transportation, and entertainment.

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