Oil Price Decline: Positioning For Turnaround Or Sale
Introduction As a reaction to the dramatic oil price volatility, many energy companies plan to streamline operations by reducing work force and shedding assets. Those who do so face tightening credit and decline in asset value that may impact the solvency of the business enterprise. Energy companies must maintain operations where possible to preserve value and position themselves for a turnaround in prices. Those without staying power because of a lack of capital may be forced to position themselves for sale of all or substantially all of their assets at the highest value. Buyers will want to acquire assets expeditiously and free of liability. Under these circumstances, various parties doing business in the energy industry must be aware of their duties and risks of liability. These parties must also be up-to-date on the means by which to expeditiously transfer assets free of certain claims and interests to maximize recovery. This Client Alert will briefly highlight only a few points to be aware of.
Attorney-Client Privileges: Who May Assert Them (Former Officers and Directors)? What Is the Effect of Dissolution? Given the unpredictability of the current energy market, a precautionary note is in order: efforts should be made to preserve attorney-client privilege in event of later litigation. The attorney-client privilege protects from disclosure to third parties confidential communications between an attorney and a client made for the purpose of obtaining (or rendering) legal advice. Therefore, non-legal advice is not protected. Generally, a corporation's equity interest owners, officers and directors cannot compel disclosure of the corporation's privileged information, since the privilege belongs to the corporation. However, in limited situations, the attorney-client privileges may be lost either thorough waiver or based on "exception." Examples include: privilege passes to chapter 7 trustee of company; based on a "fiduciary exception" to the corporate attorney-client privilege, disclosure may be compelled for "good cause" in situations where shareholders seek to enforce the rights of the corporation against the corporation's officers and directors; and disclosure of the protected communication to third party. Courts often consider the question of whether the attorney-client privilege survives the dissolution of a limited liability company, limited partnership, corporation, or other legal entity, and if so, who is entitled to assert the...
To continue readingFREE SIGN UP