The second article of our Winter 30.1 issue of the Journal of Applied Finance deals with whether directors may wonder if their fiduciary duties have changed. The authors synthesize the latest decisions of the Delaware courts on the standards of conduct for directors and the standards by which their conduct is reviewed. While directors should expect uncertainty in corporate life, neither the fiduciary duties of directors nor the protections afforded them have changed. Disinterested and independent directors, acting in good faith to make decisions they deem in the best interests of the corporation, continue to have broad protections under the business judgment rule. This legal framework enables and encourages active directors to make hard choices when they need to do so.
The paper includes flowcharts illustrating how the standards of judicial review apply to various categories of business decisions that directors may have to make. It concludes with practical suggestions for directors and General Counsels to establish business judgment rule protection for board decisions or, where applicable, withstand more stringent standards of review.
Written by Ira M. Millstein, Ellen J. Odoner, and Aabha Sharma, of Weil, Gotshal & Manges.
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