Polsky v. Virnich: Last Stop on the Gravy Train

A case recently heard by the Wisconsin Supreme Court might greatly shift the balance of power between corporate executives and creditors in Wisconsin. In most jurisdictions, when a company's debts begin to greatly exceed its assets, the directors owe a duty to the creditors to conduct the business and collect money for their benefit. For quite some time, Wisconsin law has been in the minority. As long as the company is operating, the directors owe no special duty to creditors. In Polsky v. Virnich, the owners/directors of a company siphoned off money in the form of executive compensation while running up huge debts. The Wisconsin Supreme Court recently heard oral arguments and will have a chance to bring Wisconsin's law in line with the majority rule. For a full analysis, see Michael Rust's article on the possible impacts and outcomes.