September 11, 2014
Delaware decisional law on entire fairness review of controlling shareholder transactions has been complicated in part by the subtle distinction between facially disinterested directors (who are liable only where a specific, non-exculpated breach of fiduciary duty is shown) versus interested or controlled directors whose actions are subject to entire fairness review, and who essentially are “strictly” liable if entire fairness is found to be absent.

A recent decision by the Court of Chancery clarifies the pleading standard applicable to claims against disinterested directors who negotiated and approved a controlling shareholder transaction subject to entire fairness review, and moreover makes clear that such claims are not subject to dismissal under a Section 102(b)(7) exculpatory charter provision insulating directors from personal liability for money damages caused by a breach of the duty of care.

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