IN CALIFORNIA, DIRECTORS AND OFFICERS MAY BE HELD
LIABLE FOR THE DEBTS OF THE CORPORATION
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According to the court, CarrAmerica
determined that California follows the “
„trust fund doctrine‟ ” with respect to
duties owed by corporate directors to
creditors that arise upon the corporation‟s
insolvency. The scope of this duty is to
avoid “ „divert[ing], dissipat[ing] or
unduly risk[ing] assets necessary to
satisfy‟ ” creditors‟ claims. The court observed that because this duty can be characterized as the obligation to avoid the squandering of an insolvent corporation‟s assets, “recovery for breach of this fiduciary duty generally concerns cases [in which] the directors of an insolvent corporation improperly divert corporate assets. [Citations.] Although no California cases expressly limit the „fiduciary duty under the trust fund doctrine to the prohibition of self-dealing or the preferential treatment of creditors, the scope of the trust fund doctrine in California is reasonably limited to cases [in which] directors or officers have diverted, dissipated, or unduly risked the insolvent corporation‟s assets.‟ [Citation.]” |