Thursday, December 27, 2007
Jean Roberston and Karen Visocan publish "Considerations For Nonprofit Health Care Facility Directors and Officers Before Filing"
Attorney Jean Roberston and Adjunct Professor Karen Visocan publish "Considerations For Nonprofit Health Care Facility Directors and Officers Before Filing" in the American Bankruptcy Institute Journal. Here is an excerpt:
When faced with severe financial difficulties, nonprofit health care facility directors and officers may shy away from the thought of filing for bankruptcy protection and the subsequent sale of the health care facility. This is understandable given that the primary purpose of a sale under the Bankruptcy Code of maximizing the return to creditors often conflicts with the nonprofit's charitable purpose. Furthermore, the filing may be viewed as a violation of the nonprofit directors' and officers' fiduciary duty to the health facility and invite actions for violation of their duty of care to the organization. Finally, there is a fear that the filing may impute the stigma associated with the filing of a bankruptcy petition, especially among the general public. Although these are all valid concerns, a strong case can be made that a bankruptcy filing will provide greater protections and benefits than a liquidation of the business outside of bankruptcy.
There are three considerations for the directors and officers when they are preparing for a bankruptcy filing: (1) the possibility that a §363 sale may limit director and officer liability, (2) the shield of the automatic stay and (c) the recoupment roadbumps.
To obtain a copy of the issue containing this article, go to the American Bankruptcy Law Institute Journal website for information on how to purchase the December/January 2008 issue.