Complacency Leads to Personal Liability for Officers and Directors of Private Corporations

October 3, 2003 Advisory

uring the current economic downturn, more and more officers and directors find themselves managing the affairs of financially strained corporations. Hardly a day passes where the news is not full of stories scrutinizing the actions or inactions of officers or directors of a troubled public corporation. For better or worse, the spotlight now shines brightly on the actions and omissions of officers and directors, and as a result, officers and directors are becoming increasingly concerned about personal liability for decisions that they have made on behalf of a financially troubled corporation. As discussed below, the recent decision in Pereira v. Cogan, 2003 WL 21039976 (S.D.N.Y.) delivers a timely reminder that the potential personal liabilities that lie in wait for officers and directors who fail to carry out their duties apply not only to officers and directors of public corporations but to those of private corporations as well.