Friday, March 23, 2012

Francis v. United Jersey Bank case brief

Francis v. United Jersey Bank (N.J. 1981)

-Trustee of company in bankruptcy was bringing this suit on behalf of credits (not that
it is direct and not derivative).
-Even though they are prepared by officers and experts, financial statements may
give rise to a duty to inquire further into matters revealed by those statements.
-Upon discovery of an illegal course of action, a director has a duty to object.

Note that a director’s negligence does not result in liability unless it is the proximate
cause of the harm.
Lesson is that sitting on the Board is not an honorific position, even in a closely held
family business. If the closely held corporation goes bankrupt, the trustee can sue on
behalf of creditors.

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