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Officer Exculpation in Silicon Valley 150


As of August 1, 2020, the Delaware General Corporation Law’s Section 102b)(7) was amended. This amendment allows a Delaware corporation the option to include a charter provision that limits or eliminates the liability of certain officers in direct claims arising from breaches of their fiduciary responsibility. While this amendment extends to a corporation’s officers certain protections long afforded to directors, there are limitations including:

  • Charter amendment. While newly formed corporations can include this provision at incorporation, existing corporations that have stockholders will need to amend the charter to adopt a provision for officer exculpation. This amendment must be approved by both the board and stockholders. For public companies, it also requires the filing a preliminary proxy.
  • Claim covered Unlike directors they cannot be excused from liability if derivative claims are brought against them by or on behalf of the corporation. Officers, like directors, cannot be exempted from liability for breach of duty of loyalty or acts or omissions that are not in good faith, involve intentional misconduct, or violate the law. ,…

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