Business Judgment Rule Board of Directors

News & Analysis as of

Corwin v. KKR Financial Holdings LLC, No. 629, 2014 (Del. Oct. 2, 2015) (Strine, C.J.)

In this opinion affirming the Court of Chancery’s dismissal of a stockholder challenge to a merger, the Delaware Supreme Court held that the approval of the merger by a fully informed, disinterested stockholder majority...more

Fourth Circuit: Business Judgment Rule May Not Protect Bank Officers in FDIC Action

Why it matters - Bank officers may be liable in a lawsuit brought by the Federal Deposit Insurance Corp. (FDIC) while the directors escaped liability, in a new ruling from the Fourth Circuit Court of Appeals interpreting...more

Good News for Compensation Committees

With executive compensation under fire from seemingly all directions these days, it’s nice to get some good news occasionally. In this case, that news comes via the Delaware Chancery Court’s recent decision in Friedman v....more

Mergers & Acquisitions Glossary

This Glossary contains many of the important terms and definitions used in the M&A world. The Glossary is not exhaustive, however. Like most areas of the law, M&A is a highly complex subject that involves several legal and...more

Friedman v. Dolan, C.A. No. 9425-VCN (Del. Ch. June 30, 2015) (Noble, V.C.)

In this letter opinion, the Court of Chancery dismissed claims for breach of fiduciary duty and waste under Chancery Rule 12(b)(6), holding that the business judgment rule, rather than entire fairness review, applied to...more

No Calm In Delaware After Calma v. Templeton

In derivative suits, cases are essentially lost and won at the motion to dismiss stage.  Unless the defendants succeed in winning dismissal, they must confront an unhappy choice between continued litigation with all of its...more

Closely-Held Shareholder Derivative Actions are Alive and Well in Texas

After 30 years of running his family-owned business, Hillbilly Oil Co., Jed Clampett decided to retire in 2013. The board of directors elects Jethro Bodine as Hillbilly’s President and Elly May as Vice President. Both Jethro...more

Yet Another Reason to Consider Separate Annual Limits on Director Equity Awards

As reported in a prior blog post, public company employers that are adopting or amending equity-based compensation plans should consider adding a separate annual limit on director equity awards. In a recent Delaware Chancery...more

Locke Lord QuickStudy: Litigation Threat Means Public Companies Should Review Director Compensation Process

Corporate directors are permitted to, and regularly do, set their own compensation. This has not been controversial because boards have typically taken seriously their responsibility to set compensation that is reasonable and...more

Protecting Director Equity Grants from Entire Fairness Review

The Delaware Court of Chancery recently held in Calma v. Templeton that the decision by the Citrix Systems, Inc. board of directors to grant equity compensation to its non-employee directors was subject to the entire fairness...more

Ironworkers Dist. Council of Phila. & Vicinity Ret. & Pension Plan v. Andreotti, C.A. No. 9714-VCG (Del. Ch. May 8, 2015)...

In this memorandum opinion, the Court of Chancery granted a motion to dismiss Plaintiff’s derivative complaint under Court of Chancery Rule 23.1, and in doing so, confirmed that there is a heavy burden confronting derivative...more

Exculpatory Provisions Provide Powerful Protection for Independent Directors

The Delaware Supreme Court recently issued an important decision clarifying the standards that govern claims for money damages against independent directors of corporations whose charters contain exculpatory provisions....more

A Key Reminder to Directors of Delaware Corporations When Granting Equity Awards under an Equity Incentive Plan

Corporate directors routinely make decisions regarding their own compensation. If challenged by stockholders, such decisions are generally reviewed by Delaware courts under the onerous "entire fairness" standard, which...more

Less Is More? Not when it comes to director compensation plans and effective shareholder ratification

Companies cannot merely rely upon shareholder approval to obtain protection under the business judgment rule. While the courts in Delaware do frequently apply the standard of waste to claims of breach of fiduciary duty and...more

Delaware court of chancery issues significant ruling on the ability of creditors to assert fiduciary duty claims against...

In Quadrant Structured Products Co. v. Vertin, 2015 WL 2062115 (Del. Ch. May 4, 2015), the Delaware Court of Chancery (Vice Chancellor J. Travis Laster) announced a bright-line standard governing the threshold inquiry of when...more

Delaware Supreme Court’s In re Cornerstone Therapeutics Decision Allows Independent Directors To Utilize Section 102(b)(7) Defense...

A director’s responsibilities in serving on a corporate board are attended by substantial personal financial risks—not least of which is the specter of shareholder litigation. Exculpatory charter provisions, such as Section...more

Court Of Chancery Explains Creditor’s Right To File Fiduciary Duty Claims

While it is generally known that creditors may only file derivative suits when the company is insolvent, there have been many open issues about what exactly that means. This decision answers many of those questions by...more

Director Equity Grants Subject to Entire Fairness Review

In Valma v. Templeton et al, the Delaware Court of Chancery held that grants of restricted stock units, or RSUs, to directors of Citrix Systems, Inc. were subject to an entire fairness standard of review. The court found...more

Avoiding Personal Liability: A Guide For Directors And Officers

According to the popular media, we are living in an era of corporate crime. Scandals like Enron, HealthSouth and WorldCom stretch so far back they seem like they are not even of this millennium. Among the milestones since...more

The Ropes Recap: Mergers & Acquisitions Law News - January 2015

In this issue: - News from the Courts - Delaware Supreme Court Clarifies Fiduciary Duties in Sale Context and Overturns Judicial Imposition of Auction in Deal with Passive Market Check - Illinois Court...more

Delaware Court Confirms Applicability of Business Judgment Rule to Investment Decisions of Insolvent Corporations

In its October 1, 2014 decision in Quadrant Structured Prods. Co. v. Vertin, et al., C.A. No. 6990, the Delaware Court of Chancery applied the protections afforded under the business judgment rule to investment strategies...more

Georgia Supreme Court: Business Judgment Rule Valid, But Bank Officers Can Still Be Liable

In the context of Federal Deposit Insurance Corporation (FDIC) litigation against the former directors and officers of a failed bank, the Georgia Supreme Court has upheld the validity of the business judgment rule in the...more

Business Judgment Rule in Georgia: Not a "Get Out of Jail Free Card" for Officers and Directors

The Georgia Supreme Court has adopted the Business Judgment Rule with a very important nuance that requires officers and directors to not only be prepared when making their decisions but to document their preparations in...more

Recent Practical Effects of “Just Saying No”

In the past few months, we have seen an increasing number of hostile or unsolicited M&A bids where boards of directors of target companies have resisted bidders’ advances. Traditionally, the board-friendly Delaware approach,...more

Does the Business Judgment Rule Protect Bank Officers and Directors?

When a corporation suffers significant losses, or ultimately fails, frustrated shareholders, creditors, or others often try to sue the corporation and/or its officers and directors for losses caused by mismanagement of the...more

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