Merger and Acquisitions – Board of Director Obligations, Part 2
This blog continues my series on obligations (and rights and responsibilities) of the board of directors during a merger and/or acquisition transaction. The first in the series went over the directors basic duties of care, loyalty and disclosure.
Indemnification of Corporate Officers
Many states’ corporate laws allow entities to include provisions in their corporate charters allowing for the exculpation and/or indemnification of directors. Exculpation refers to a complete elimination of liability whereas indemnification allows for the reimbursement of expenses incurred by an officer or director.
Delaware, for example, allows for the inclusion of a provision in the certificate of incorporation eliminating personal liability for directors in stockholder actions for breaches of fiduciary duty, except for breaches of the duty of loyalty that result in personal benefit for the director to the detriment of the shareholders. Indemnification generally is only available where the director has acted in good faith. Exculpation is generally only available to directors whereas indemnification is available
