[twawaaay]

Okay, I am not versed in US law, but wouldn't boards' liability be very limited given that the wages are unpaid due to failure of another entity holding their cash? Was there anything they could do about it? They had to hold their cash somewhere... Liability is for sins of commission or omission. Here they did neither.

[sidfthec]

I think the implication is that the board wouldn't want to continue not paying and would lay people off. As in, how long can the board continue to employ people who they can't pay?

(I have no idea what I'm talking about legally, I'm just trying to interpret what I'm reading).

[twawaaay]

So you are suggesting that they might get away with one payment (because the money went missing) but not with more?

What if they relied on cash for multiple payments (think startup that got funding)?

It is also unlikely that people wouldn't notice they are not getting paid so it is hard to argue they won't know about further non-payments.

I would say if they don't have money to pay people they have nothing else to do than fire them or shut down/go bankrupt if it means the company cannot continue.

What if they have a chance to get funded/bailed out or if they expect money to come soon (from expected cash flow)?

I think the danger for the board should be if they promise people get paid and then they can't do good on that promise. Or if they actually have money but use it for something else instead of paying people.

[suresk]

I don't this is an area of corporate law that has been super thoroughly tested? But I think the theory is -

Look, we had $X in our account on Wednesday and did a payroll run that was more than covered, but then our bank went under and the payments never got there. That's not our fault, nothing we can do about it!

But as time goes on and you're still employing people while having no bank account, you become more culpable for their unpaid wages after you find out you have no money.

The tricky thing here, I think, is that it still isn't very clear what is going to happen and it'd be silly to immediately fire a bunch of people because of it. There is a good chance some other bank acquires SVBs accounts and things are back to normal pretty quickly. If that doesn't happen, there is still a lot of money to go around, so you aren't losing 100% of what is in there.

I think there is a good argument that it is prudent and legally defensible to wait a day or two to figure out what is going on before you go nuts and shut the business down.