Fiduciary Duties Owed Creditors

Posted on April 4, 2011 by Rob Sullivan

 

 

Wisconsin’s Supreme Court 3-3 split in Polsky v. Virnich keeps Wisconsin’s unique view on fiduciary duties owed creditors by closely held corporations in place. In summary, officers and directors do not owe a fiduciary duty to creditors unless the company is BOTH: (a) insolvent; and (b) not a "going concern." Most jurisdictions do not have the second prong of this test (i.e. the corporation only needs to be insolvent for the duty to arise).

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