Limiting the Liability of Officers and Directors and Improving Corporate Governance Initiatives

Summary

Practical advice is that at all times, directors and officers should exercise sound business judgment and use best practices when making decisions for the corporation to limit their exposure to lawsuits and liability. Nevertheless, the threat of incurring liability for those decisions cannot be taken lightly, particularly in the context of an insolvent corporation where little or no value may exist for investors except for the recovery to be attained through litigation. As an incentive for qualified parties to be willing to serve a debtor, and to ensure that the debtor is being controlled by capable management, Delaware has taken the lead in developing additional protections that limit director liability.