Recently, a federal appeals court in In re Lemington Home for the Aged revived claims brought by unsecured creditors against the directors and officers (D&Os) of the insolvent Lemington Home for the Aged when it reversed a lower court’s decision in favor of the D&Os. The unsecured creditors committee asserted that the D&Os had breached their fiduciary duty to the unsecured creditors while wrapping up Lemington Home’s corporate affairs. The committee further alleged that the D&Os had acted fraudulently in conveying assets to third parties, which led to Lemington Home’s deepening insolvency.

Aside from this case’s significance to the unsecured creditors committee, the court’s discussion in this opinion may be a useful reminder to governing boards and officers of nonprofit health care providers. Governing boards and officers of nonprofit health care providers should consider the following five things when facing corporate decisions and the looming possibility of insolvency....

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