Law360, New York (January 26, 2010) -- Directors of California corporations have, for years, struggled to understand the scope of their fiduciary duties when a corporation is insolvent versus when a corporation is in the “zone of insolvency.”

While other states (particularly Delaware) have provided some recent guidance in this area[1], the California Court of Appeal recently provided some much needed clarification — including providing comfort to the decision-making processes of directors who are considering various alternatives when a corporation enters into a zone of insolvency.