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Publication Date

6-3-2024

Abstract

This Note examines the implications of the 2022 amendments to Delaware’s General Corporation Law— particularly the changes to Section 102(b)(7), which extends exculpation provisions to corporate officers. Previously limited to directors, these provisions now allow corporations to shield officers from personal liability for breaches of duty of care, albeit in a more constrained manner. The expansion raises questions about its necessity and potential impact on corporate law—with particular focus on the remaining accountability mechanisms available to shareholders. Delving into the evolving dynamics of corporate governance, this Note considers the current topography of corporate law: focusing on the roles and interplay of shareholders, directors, and officers within the corporate structure. It further explores the historical and legal contexts, particularly in Delaware, which have shaped current fiduciary duties and corporate accountability. It raises concerns regarding the implications of exculpation expansion on fiduciary duties, future legislative action, and potential judicial reception, particularly in light of recent shifts in shareholder litigation strategies and rulings. Central to this discussion is the impact of the exculpation amendment on various aspects of corporate governance. For corporate officers, the expansion potentially reduces accountability and alters the power dynamics within corporations. For shareholders, additional exculpation diminishes their ability to hold officers accountable for negligence, impacting their litigation rights and potentially influencing shareholder rights. In addressing these considerations, this Note also analyzes specific cases, including In re McDonald’s Derivative Shareholder Litigation, to illustrate the practical applications of these legal shifts, and In re Brookfield Asset Management, to raise the issue of diminution of available shareholder claims in instances where shareholder claims are needed most. This Note argues that, in light of all of these changes from shifting roles within corporations, recent rulings, and the exculpation amendment, fiduciary duties are in prime position to be scrutinized and shareholders’ accountability options abrogated. Finally, this Note posits that this legislative change, passed without substantial scrutiny or debate, reflects a broader trend in corporate law. It suggests a potential dissonance between the desire to protect officers from frivolous litigation and the need to maintain robust mechanisms for corporate accountability. The analysis concludes that while the exculpation provision aims to balance interests within the corporate legal framework, its long-term effects on corporate accountability remain uncertain and warrant careful observation.

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