One of the most overlooked duties of directors and officers involves the Fiduciary Duty to a company's creditors.  The present economic difficulties make this an acute peril for the company's management team. 

According to Advisen FPN July 13 statement, once the solvency of a corporation is in question, directors need to take account of the interests of the creditors as well as the owners as they assess the best course of action.  The fiduciary duty poses many tricky issues, including the importance of insuring that adequate and accurate board minutes are prepared and maintained for each meeting of the Board and any subcommittee of the Board.

As a general matter, minutes are a very condensed record to show what happened at a board meeting.  Accordingly, there should be mention of each matter discussed and the factors considered should be recorded.  These do not have to be set forth in detail.  While keeping proper minutes is a critical part of every company's corporate governance regimen, it becomes even more crucial once directors are under the heightened scrutiny that arises once a company is in the zone of insolvency.  At that point the Board will need to discuss how best to protect creditor interests and the minutes should reflect those discussions.  Even if directors are acting diligently exercising their fiduciary duties, if the minutes do not show the relevant discussions took place, the directors may find it difficult, after the fact to prove that they acted responsibly.

The appropriate degree of detail for the minutes is not easy to define.  However, minutes should include enough detail to enable a third party, such as a court, to determine that actions taken by the Board were reasonable and were made on the basis of adequate information.  Including more detail than necessary can increase the opportunities for a third party to second guess the Board actions and therefore increase the possibility of third party claims against the directors.  Each Board will be facing a unique situation, so care should be taken to include the level of detail that the Board and company counsel feel is appropriate.