When a company files a bankruptcy petition, usually the interests of an officer or a board member are the same as the company as a whole. But what happens when the interests of the company diverge with those of the company? Perhaps, for example, the company has determined that it wishes to liquidate in bankruptcy, but a senior manager who has personally guaranteed much of the debt has decided that it is not in his interest because much of the debt will remain unpaid.
In this type of situation, it is common for a senior manager to obtain his own counsel to assert his interests without concern about the debtor or its creditors. Once retained, independent counsel for this manager will be free to assert objections to the company’s decisions and can assert the manager’s individual interests without concern about the conflict of interest that would inevitably exist without separate counsel.
In addition, it is not uncommon for litigation to ensue concerning the conduct of officers and directors of a business just prior to the bankruptcy filing. In that type of case, issues of fiduciary duties and negligence arise that have a whole host of concerns that may conflict with the debtor’s interests. It would be imperative that an officer or director have his/her own representation to be certain that their individual assets and interests are protected notwithstanding those of the company.
Historically, DuffyAmedeo professionals have advised clients on similar situations while keeping in mind the various professional and legal obligations the senior manager would have to the company (if any) and in some cases even to the company’s creditors. Of course, each situation is different and that manager’s obligations could change during the course of the bankruptcy case.