Imagine you are currently engaged as a financial adviser for a lender that is in workout discussions with its borrower. In those discussions, the parties have acknowledged the need for the company to engage a chief restructuring officer (“CRO”). Among other firms, the parties have identified you as a potential candidate for the engagement. Can you accept the engagement after having served as the lender’s financial adviser? Does the nature of the work you did for the lender matter?
Or perhaps a lender you have worked for in the past wants to engage you as its financial adviser in connection with its relationship with a distressed borrower. You are already aware that the company is experiencing financial distress and it is possible the company may ultimately seek to engage you independently as its CRO or restructuring advisor. Would accepting the lender engagement disqualify you from a future engagement with the borrower?
While these types of dual engagements are not unheard of, they can be problematic. It is well established that corporate officers and directors owe fiduciary duties, perhaps most notably the duty of loyalty. A CRO or similar restructuring adviser will often assume decision-making authority over a company, or exercise substantial influence over a company’s operations, rather than act only in a mere advisory capacity. In such situations, the CRO or restructuring adviser may be held to the same fiduciary duties as a typical corporate officer or director.
When a CRO or restructuring adviser attempts to serve, or sequentially serves, parties with differing economic interests in the same transactions, several concerns can arise. For example, continuing duties owed by a CRO or restructuring adviser to its prior client (e.g., the lender) may raise concerns as to whether the CRO or restructuring adviser can fully discharge its fiduciary obligations to its new client.
Similarly, a broader or institutional relationship between the CRO or financial adviser and its former client (e.g., the lender) may create additional concerns with respect to the CRO’s or financial adviser’s independence and ability to act in the company’s best interest. In view of these concerns, courts tend to closely scrutinize dual engagements involving CROs or restructuring advisers.
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"The Perils of Dual Engagements," by Michael B. Schaedle and Matthew E. Kaslow was published in the October 2026 issue of Secured Finance Network's The Secured Lender.