While operating your business as a corporation or other authorized business entity provides owners, officers, directors, and employees with limited liability protection, once the business is suffering from financial distress or becomes insolvent, that protection is in jeopardy, and business owners need to act with caution to preserve that protection.
Some steps to protect your distressed businesses’ limited liability include:
- Ensuring that all representations are truthful and not misleading.
- Conducting regular and appropriate meetings to ensure that directors, officers, and managers are aware of the business situation.
- Retaining counsel to advise not only the business, but its officers and directors of potential risks.
- Ensuring that all decisions can be justified under the “business judgment rule”, and preserving the evidence justifying the decision.
- Reviewing and maintaining E&O, D&O and other insurance coverage, and protection.
- Addressing negative information and controlling information disclosures.
- Reasonably investigating major corporate decisions to justify them.
- Ensuring that your actions do not compete with or damage the business or its future.
- Disclosing and addressing any potential conflicts of interests.
- Avoiding any fraudulent transfers.
The attorneys at Brooks, Tarulis & Tibble, LLC have long advised businesses and their officers, directors, managers and owners on proper operation and documentation and in both good times and bad. If we can be assistance to you or should you have any questions or concerns, please contact us.
This Brief is designed to provide our friends and clients with information regarding the various subject matters covered, it is not designed to take place of legal, accounting or other professional advice. If expert assistance is required, the services of a competent professional should be sought. This memorandum may constitute advertising under the rules regulating Illinois attorneys.
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