2009 Updates to Delaware General Corporation Law - Part 1: Enhanced Protection for Directors


Effective August 1, 2009, Delaware has amended section 145(f) of the Delaware General Corporation Law to address the problem created by the Delaware Chancery Court’s recent decision in Schoon v. Troy Corp., 948 A.2d 1157 (Del. Ch. 2008).

In Schoon, a former director sought advancement expenses under the corporate by-law provision in place during his tenure on the board and existing at the time of the act in question. However, prior to the commencement of the action against the former director, the company’s board amended that by-law provision such that former directors were no longer entitled to advancement of expenses. The Chancery Court found that the advancement rights claimed by the former director vested only upon the commencement of the suit against him, and therefore any rights would be determined by the corporate documents in effect at the time of the suit. Deciding that the by-law amendment was valid, the Court concluded that the former director was not entitled to advancement of his litigation expenses.

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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.

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