As frequently recognized by the Court of Chancery and as reflected in the Court of Chancery’s recent decision in In re China Automotive Systems Derivative Litigation, Consol. C.A. No. 7145-VCN (Del. Ch.), a Caremark claim is one of the most difficult corporate law claims to plead. A Caremark claim is a claim that directors caused or permitted a corporation to break the law or failed to establish or oversee a monitoring system for a corporation’s compliance with the law.
In China Automotive, the plaintiffs were stockholders of China Automotive Systems Inc. The plaintiffs brought derivative claims for breaches of fiduciary duty, insider trading and unjust enrichment against defendants Hanlin Chen, Qizhou Wu, Bruce Carlton Richardson, Robert Tung and Guangxun Xu. Chen was a majority stockholder of the company’s common stock and served as chairman of the board. Wu was the CEO and served as a director. Richardson, Tung and Xu were directors and members of the audit, compensation and nominating committees.
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