View Webinar Recording

This program was a discussion focusing on a recent enabling amendment to the Delaware General Corporation Law that applies to all public and private Delaware-incorporated companies regarding the extent to which covered corporate officers may or should be exculpated from personal liability, as well as cover other recent Delaware statutory amendments.
For over 45 years, Delaware law has permitted directors of Delaware corporations to be exculpated from personal monetary liability to the extent such protections are set forth in the certificate of incorporation, subject to certain exceptions.  However, such protective statutory provisions did not extend  to officers.  In August 2022, the Delaware legislature and the Governor of Delaware, on the recommendation of the highly respected Delaware Corporation Law Council, enacted amendments to the Delaware General Corporation law that would expand the right of a corporation to adopt an “exculpation” provision in its certificate of incorporation to cover not only directors (as has been allowed and widely adopted since 1986, following Smith v. Van Gorkom) but now also to corporate officers, subject to certain limits.  The amendment to Delaware law is not self-effecting but would allow companies to take action to adopt exculpation provisions that protect covered officers from personal liability for fiduciary duty claims, other than breaches of the duty of loyalty, intentional misconduct or knowing violations of law – with an additional exception that claims against officers will not be barred “in any action by or in the right of the corporation.”  Companies and boards themselves will retain the right to bring appropriate actions against officers, and this additional exception will permit stockholder derivative claims against officers for breach of the duty of care to continue to be brought if demand requirements are met.
Leading Delaware corporate law experts advocated for this enabling amendment in an article published last year entitled “Optimizing the World’s Leading Corporate Law: A 20-Year Retrospective and Look Ahead.” Questions that will be explored in the discussion include:

  • what legal developments have occurred in recent years to prompt this legislative change,
  • what companies and boards should consider doing now,
  • whether or not publicly traded companies and their boards should take action to reduce the discrepancies between director and officer exculpation from liability by proposing amendments to the charter as permitted under the new law, and what information they should consider in making their decision,
  • how this development may impact the upcoming proxy season,
  • what kind of engagement with or disclosure to stockholders may be appropriate or helpful if proposing Charter amendments,
  • what may be the implications for possibly reduced D&O insurance costs,
  • what kinds of remedies will continue to be available to boards and stockholders for problematic officer conduct and
  • whether or not the proposed limits to officer exculpation effectively advance and balance the best interests of corporations and their stakeholders (including stockholders).

In addition to the foregoing, there will also be a discussion of other recent Delaware statutory amendments of interest to attendees.

The participants were:

  • Sabastian V. Niles Partner, Wachtell, Lipton, Rosen & Katz, Moderator
  • Lawrence A. Hamermesh, Executive Director, Institute for Law & Economics, University of Pennsylvania Law School; Professor Emeritus, Widener University Delaware Law School
  • Theodore N. Mirvis, Partner, Wachtell, Lipton, Rosen & Katz
  • Patricia O. Vella, Partner, Morris, Nichols, Arsht & Tunnell LLP
  • Justin P. Klein, Director, John L. Weinberg Center for Corporate Governance, Welcome


DGCL Section 8 text (that includes Section 102)

Optimizing the World’s Leading Corporate Law: A 20-Year Retrospective and Look Ahead

“Amendments to Delaware General Corporation Law in 2022

Delaware Approves Permitting Exculpation of Officers from Personal Liability in Corporate Charters,”  Wachtell, Lipton, Rosen & Katz, August 3, 2022