Delaware Chancery Court Clarifies Delaware Boards' Fiduciary Oversight Duties as to Corporate Operations Abroad

Kevin R. Shannon and Christopher N. Kelly
Bloomberg BNA Corporate Governance Report

In 2013, the Delaware Court of Chancery issued three decisions in which it denied motions to dismiss claims for breach of the duty of oversight (i.e., Caremark claims) asserted against directors of Delaware corporations having significant operations in China. In each case, the court found that sufficient facts were pled against the defendant directors to support a finding that they acted in bad faith by consciously disregarding their oversight duties.

The decisions serve as cautionary tales to boards of directors that they may face personal liability for the damages suffered by the corporation if they do not actively monitor its foreign assets and operations. These decisions also provide directors with helpful insight into how they can satisfy their fiduciary oversight duties in such situations.

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