The article examines the decision made by the U.S. Bankruptcy Court for the Northern District of West Virginia in In re Tara Retail Group, LLC, Case No. 17-bk-57 (May 4, 2017). In this case, an independent director who never affirmatively voted in favor of authorizing the filing of a bankruptcy case was found to have tacitly ratified the borrower’s decision to file by remaining silent and not objecting until after the case was filed.
The decision serves as a reminder to lenders that when requested to authorize the filing of a bankruptcy case, an independent director may be required to act affirmatively in one way or another either before or after the filing. Mere silence may not suffice. Lenders and practitioners are well advised to consider this a possibility in such situations.