Personal liability of directors under Delaware law
One of o the issues that has plagued directors of all sorts of companies is the potential for personal liability. Over the last several decades, Delaware has enacted provisions in its corporate law that can limit the liability of directors and permit a corporation to provide indemnification to directors. One thing that has always been a “hole” in these protections has been that they depend upon having and keeping in place certain bylaw and charter provisions. To put a fine point in it, Delaware corporations have been able to change existing bylaw and charter protections to deny them to directors, who thought they were protected. Delaware has made an important change (effective August of this year) to improve the protection of directors. See our firm’s client alert on this topic which says in relevant part: “The statute now explicitly prohibits the elimination or impairment of any indemnification and advancement rights provided in the corporation’s charter and by-laws once the act or omission in question has occurred. Indemnification and advancement rights could only be eliminated or impaired retroactively where the by-law or charter provision, existing at the time of the act or omission in question, expressly authorized such elimination or impairment.”
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