Since the 1980s, Section 102(b)(7) of the Delaware General Corporation Law (the “DGCL”) has enabled Delaware corporations to provide exculpation from breaches of the fiduciary duty of care to directors – but not officers – in certain circumstances. Officers can now come in from the cold, as Section 102(b)(7) has now been amended to provide similar protection for certain officers. Specifically, the amendments, which became effective on August 1, 2022, allow Delaware corporations to provide exculpation from breaches of the duty of care to specified officers in certain circumstances. The new provisions allow a qualifying officer to be exculpated from such claims made directly by stockholders but do not provide relief in connection with other fiduciary duties, derivative actions, or actions brought by a corporation’s board against its officers.
We view this amendment as a major forward step. If your company (or any subsidiary) is a Delaware corporation, you should seriously consider amending its certificate of incorporation to provide this protection. And if you are an officer of a Delaware corporation, you should make sure your board of directors is aware that this protection is available and urge your board to take the steps needed to provide the protection..