Last month, Judge Robert W. Sweet of the Federal District Court in Manhattan Ruled that ex-"21" Club owner Marshall S. Cogan had drained his bankrupt company, Trace International Holdings, of tens of millions of dollars while its officers and directors stood by and did little to stop it.

According to Paul Feuerberg, CPA, a Partner of Boca Raton, Fla.-based Goldstein Lewin & Co., the ruling implies that the officers and directors of private companies can not simply rubber-stamp whatever "their boss" wants, but have a fiduciary duty to the corporation.

"If allowed to stand, this judge's ruling establishes yet another precedent that there probably is little difference between public and private companies where corporate governance is concerned," according to Feuerberg. The ruling spells out that directors and officers of private companies will be held to the same standards as those at public companies in determining whether they have fulfilled their fiduciary duties.

"Creditors of bankrupt private companies may use this precedent to go after directors and officers for recovery of damages caused by mismanagement, even if those directors and officers did not benefit personally," said Feuerberg.