Fiduciary Duties of the Board of Directors

by Practical Law Corporate & Securities

A Practice Note that outlines the fiduciary duties of the board of directors, emphasizing the core duties of care and loyalty under Delaware law. This Note examines the judicial standards of review applied to directors' conduct, such as the business judgment rule, enhanced scrutiny, and entire fairness. It also highlights the March 2025 amendments to the Delaware General Corporation Law (DGCL) that introduce statutory safe harbors for controlling stockholder transactions and interested director and officer transactions, contingent upon certain conditions. The Note provides a comprehensive overview of the legal framework governing directors' fiduciary responsibilities, including the twice-testing principle and the interplay of the corporate contract and equitable rules. It further discusses the implications of these duties in various contexts, such as insolvent corporations and controlling stockholder scenarios, while addressing the potential liabilities and protections available to directors. This Practice Note serves as a valuable resource for understanding the complexities of fiduciary obligations and the evolving legal landscape in Delaware corporate governance.