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Showing 1 post recarding Delaware Court of Chancery.

Continuous Insolvency Requirement and Irretrievable Insolvency Test Held By Delaware Chancery Court Inapplicable in Creditor-Derivative Claims

Quadrant Structured Prods. Co. v. Vertin, No. 6990-VCL, 2015 WL 2062115 (Del. Ch. May 4, 2015)

In this Opinion, Vice Chancellor Laster addressed two questions with respect to a derivative claim asserted by a creditor on behalf of a corporation – namely (1) whether such claims may be maintained only during the time that a corporation is actually insolvent and (2) whether to establish the insolvency of the corporation, such creditor must show that the corporation has “a deficiency of assets below liabilities with no reasonable prospect that the business can be successfully continued in the face thereof.”  Answering both questions in the negative, the Chancery Court held that a creditor will have standing to sue derivatively if it establishes that the corporation was insolvent at the time the derivative suit was filed and that insolvency may be proven under either one of the two traditional insolvency tests – the balance sheet test or the cash flow test. Read More ›