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June 2017 Archives

Overcoming the Business Judgment Rule in Texas

The Business Judgment rule allows corporate officers and directors to avoid being held personally liable for business decisions made in good faith with honest motivations, but with unfortunate results. This rule has prevented shareholders from brining derivative suits against officers/directors of a corporation for breaching their fiduciary duty when they make an honest decision that does not pay-off. However, the Business Judgement Rule is not all powerful. In some circumstances it does not apply and even when it does, there are ways to overcome it. This blog is designed to give a brief overview of the Business Judgement Rule and how it can be overcome in Texas.

When Do Fiduciary Duties Shift to Creditors in Texas?

Typically, a corporation's directors and officers only owe fiduciary duties to the corporation and its shareholders, but not to the corporation's creditors. However, Texas Courts have consistently held that fiduciary duties can shift from shareholders to creditors when the corporation begins to experience financial turmoil. Unfortunately, Texas Courts are split on what financial turmoil is enough to trigger this shift. This blog post will detail the split within the Texas Courts of when the shift of fiduciary duties is triggered.

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