On June 24, 2016, in a case of first impression in Illinois, the Illinois Appellate Court, First District, in Caulfield v. The Packer Group, Inc. held that shareholders have standing to pursue a shareholder derivative suit against an insolvent corporation. This development offers a means for a corporation to recoup - for the benefit of its shareholders and creditors - assets lost as a result of management's waste and fiduciary breaches. Shareholders can now claim derivative suits against insolvent companies in Illinois.
The Packer Group (TPG) was a closely held corporation composed of three wholly owned subsidiaries: Packer Engineering Inc. (PEI), Packer Environmental and Facility Consultants Inc., and Packer Technologies International Inc. The two plaintiffs were PEI's president/chief technical officer and its CEO. They filed a shareholder derivative suit on behalf of TPG and PEI against the inside directors of TPG, alleging that the inside directors misappropriated and wasted TPG's assets for their own benefit. The inside directors were TPG's founder and chairman of the board of directors, its executive vice president of finance and secretary of the board and two members of TPG's board. Shareholders can now claim derivative suits against insolvent companies to right previous loopholes.
