Two recent Delaware cases involving independent directors of corporations with foreign operations provide a powerful reminder that resigning from the board of directors of a troubled company may not be a simple matter. In both cases, Delaware chancery court judges denied the director defendants’ motions to dismiss; if the allegations—primarily, that the directors of each company breached their duty of oversight—are proven at trial, the directors potentially could face personal liability. While nothing about these recent cases indicates a radical change in Delaware law, and while the standards for proving such a claim remain very high, both decisions offer important observations about the Delaware courts’ expectations of directors.

These cases provide an opportunity for directors to consider how they might react if they discovered corporate malfeasance and how they might handle fundamental, irresolvable concerns or disagreements (whether with management or other directors) that may arise while serving as a director. Ideally, a director should think through these and related issues prior to accepting a director position in a public or private corporation. Once a member of the board, a director must consider how to address such unfortunate circumstances if they do arise, including whether to resign as a director and, if so, how. These are not easy matters, and the answers largely will be determined by the individual facts and circumstances of the particular situation. Though the recent Delaware cases involve foreign corporations and allege rather egregious corporate misconduct, they are a useful starting point to consider directors’ legal and ethical duties in this context.

The Delaware Cases

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]