Stroock Special Bulletin
"Aurelius Decision: Creditors of an Insolvent Texas Company Can’t Sue Directors Until After It’s Too Late"
Add Texas to the list of jurisdictions that have restricted the ability of creditors to sue directors of an insolvent corporation to stop corporate waste or mismanagement. This Stroock Special Bulletin discusses Aurelius Capital Master, Ltd. v. Acosta – the latest case to weigh in on the issue of whether and when creditors of an insolvent company can sue corporate directors for breach of fiduciary duty. In Aurelius, the court gave creditors of a Texas debtor a particularly frustrating answer: Yes, in theory they can sue, but not until their corporate debtor is already out of business.