Board Of Contributors: Corporate Monitors Keep Status Quo During Crises

With high-profile Ponzi scheme cases such as Bernie Madoff and Scott Rothstein being front-page news for several years now, the public has grown accustomed to court-appointed fiduciaries, such as bankruptcy trustees and receivers. But there is another type of court-appointed fiduciary that is less known but equally effective these days—the corporate monitor.

So what is a corporate monitor? Like a receiver and trustee, a corporate monitor is a lawyer, accountant or other disinterested professional appointed by the court as a neutral third party over something. However, unlike a receiver or trustee who typically has expansive powers (and thus potentially more costs), a corporate monitor traditionally performs a specific set of functions or has a single-purpose duty. For example, the court (whether state or federal) may appoint a corporate monitor to continue operating a business for a specified duration as the litigants fight it out in court. In this context, the corporate monitor typically oversees the actions of the company’s management to prevent destruction of documents, dissipation of assets or other inappropriate behavior. If the business is no longer operating, the court may appoint a corporate monitor to simply hold assets or serve as a liquidating agent to repay creditors. No matter the situation, the corporate monitor’s main focus is to preserve the status quo of the business, the entity or the assets over which he or she has been appointed.