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Insights: Personal Liability Risks of Directors of Financially Stressed Start-Up

For today's Insights and Opinions section, we have an article on Navigating Turbulent Business Seas: Personal Liability Risks of Directors of Financially Stressed Start-Ups from Michael Sherman, Neil Elan and Karine Akopchikyan at Stubbs, Alderton, and Markiles LLP (www.stubbsalderton.com).


The halcyon days of start-up companies and the venture community attraction to them hit a hard stop as the COVID-19 lock down spread across the U.S. earlier this year. As the first half of 2020 nears an end – and in the wake of COVID-19 restrictions and the civil unrest our country has recently faced – many companies and their board members are faced with difficult strategic decisions and are confronting the potential for unprecedented corporate action. The financial distress that has now been wrought upon the start-up community has led many businesses to operate well below pre-pandemic budgets and forecasts, and in many instances in or near (sometimes referred to as reaching the “zone of”) insolvency. Many directors are facing pressure to take extraordinary steps to enable their company to access capital or pursue business strategies that were unthinkable just a few months ago, in some instances simply to keep the lights on and try to “live to see another day.” Continued


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