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Case Briefs on Corporate Law

Case Briefs on Corporate Law

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Published by Yin Huang / 黄寅

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Categories:Types, Business/Law
Published by: Yin Huang / 黄寅 on Sep 27, 2010
Copyright:Attribution Non-commercial

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12/08/2015

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780 A.2d 1075 (Del. 2001)

1.11.1 Overview

The Delaware Supreme Court held that § 102(b)(7) of the Delaware General

Corporation Law insulated directors from personal liability for breaching the

duty of care.

1.11.2 Facts

Frederick’s of Hollywood was negotiating a merger with Knightsbridge Capi-

tal Corporation. The terms of the merger restricted Frederick’s from negoti-

ating with competing bidders. Despite that Frederick’s subsequently received

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higher bids from two other prospective buyers, the directors of Frederick’s

completed the merger with Knightsbridge. Shareholders of Frederick’s then

sued on the ground that the directors had breached the duty of care by failing

to consider the higher bids..

1.11.3 Issue

Can the directors be personally liable for breaching the duty of care?

1.11.4 Holding

The directors cannot be personally liable for breaching the duty of care.

1.11.5 Reasoning

Veasey, Chief Justice: Section 102(b)(7) of the Delaware General Corpo-

ration Law insulates directors from personal liability for breaching the duty

of care. Since the shareholders have not alleged that the directors engaged

in conduct falling within any of the exceptions to § 102(b)(7), the directors

cannot be held personally liable.

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