Richards Layton & Finger

Deepening Insolvency: Developments for Directors

January 2007

Deepening insolvency first appeared as a theory of damages. It rapidly expanded into an independent cause of action that threatened directors and officers of insolvent companies. Then, almost as rapidly, many courts abandoned it. Once seen as a potent plaintiff device for suits against officers and directors,1 deepening insolvency—in the latest stage of its evolution—has faded to a shadow of its former self.