Assessing Directors’ Protections After Del’s Bankruptcy Ruling.

By Ryan Dahl, Matthew McGinnis and Benjamin Rhode (January 14, 2022, 4:08 p.m. EST) – As we look to 2022, we draw your attention to the lessons of the October 2021 decision of the United States Bankruptcy Court in the District of Delaware in Friedman v. Wellspring Capital Management LLC.[1]

Wellspring is a cautionary tale for the trustees of a distressed or potentially distressed company – particularly with respect to negotiations around release or indemnification provisions for those same trustees.

In Wellspring, the Virginia bankruptcy laws court held that an alleged breach of the duty of loyalty could survive a motion to dismiss when:

The company in difficulty would have concluded an agreement in principle on an amicable restructuring; and

Apparently the…

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