John Saathoff, left, and Cliff Gardner, right, of Skadden, Arps, Slate, Meagher & Flom. Courtesy photos
On Aug. 1, Gov. John Carney signed into effect a number of amendments to the Delaware General Corporation Law (DGCL). Included among them was an amendment to Section 102(b)(7) of the DGCL that permits Delaware corporations to include in their certificate of incorporation a provision eliminating or limiting the personal liability of certain of the corporation’s officers for monetary damages for certain alleged breaches of fiduciary duties.
Delaware corporations have been permitted to limit or eliminate the personal liability of directors for monetary damages arising out of a breach of their fiduciary duty of care since 1986, when Section 102(b)(7) was originally added to the DGCL. Unlike directors, however, the officers of a Delaware corporation have not historically been afforded this protection—even where officers also serve as a director of the corporation, they can be exculpated for their actions taken as a director while still being liable for actions taken in their capacity as an officer. This two-tiered approach to exculpation for directors and officers persisted even after the Gantler v. Stephens decision in 2009, where the Delaware Supreme Court held that officers of Delaware corporations owe the same fiduciary duties that are owed by the corporation’s directors.
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