Shelling out whopping amounts of cash to a pension plan when other claims are looming could also have legal consequences. If a company has crossed into the muddily defined "zone of insolvency," directors and officers could find themselves the targets a lawsuit from other creditors if they plotted out such payments, notes William Lenhart, National Director of BDO Seidman's Financial Recovery Services Group.
When companies enter into the zone, says Lenhart, the duties of directors and officers shift partly from shareholders to creditors. "Just not pulling the plug soon enough" on payments to retirees, bondholders, or other unsecured creditors could land managers in court, Lenhart suggests.
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