Delaware Court Decisions Denying Indemnification Rights Underscore Need for Carefully Drawn Indemnification Provisions


Recent decisions of the Delaware courts raise important issues for directors of Delaware corporations concerning their indemnification rights.[1]

In Schoon v. Troy Corp., the court upheld amendments to the bylaws of a corporation that retroactively stripped a former director of his right to receive advancement of expenses in cases filed after the former director left the board.

In Levy v. HLI Operating Co., Inc., the court denied indemnification to certain former directors because they received separate indemnification payments from an investment fund – which they represented on the board of directors – and there was no contractual provision addressing the relative priority of the indemnification obligations of the corporation and the investment fund.

For Delaware corporations and their directors, these decisions highlight the importance of making clear in the relevant indemnification provisions:

*When a director’s indemnification rights become vested and may not be changed without the director’s consent;

*The status of indemnification rights as contractual rights that may be enforced by a director;

*The priority of the corporation’s indemnification obligations in relation to other indemnitors.

Please see full update for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP | Attorney Advertising

Written by:


Morrison & Foerster LLP on:

Popular Topics
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.