If Director's Fiduciary Obligations Are Not Contractual, What About Rights To Indemnification?

Allen Matkins
Contact

Allen Matkins

Yesterday's post concerned, a recent ruling by Vice Chancellor Sam Glasscock in Lacey v. Mota-Velasco, C.A. No. 2019-0312-SG (Del. Ch. Feb. 11, 2021).  In finding that a director's duties are fiduciary, not contractual, the Vice Chancellor observed:

"While a corporate charter operates in some respects as part of a contractual arrangement among the stockholders and the corporation and its board, the entity and its directors are not contractually bound to one another by the charter—they are not counter-parties—and the legal compulsion for directors to comply with the charter arises as part of their fiduciary duties, and not in contract."

If a corporation and its directors are not counterparties to a contract embodied in the corporate charter, do directors, officers and other agents have any right to enforce indemnification provisions included in the corporate charter? 

It seems, and seemed, to me that a case can be made that the case can be made that indemnification provisions included in corporate charters could meet the definition of a contract, at least under California law. 

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.

© Allen Matkins | Attorney Advertising

Written by:

Allen Matkins
Contact
more
less

Allen Matkins on:

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:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.