When a shareholder derivative plaintiff initiates an action on behalf of the corporation without first having made a demand on the board, Rule 23.1 of the Delaware Court of Chancery Rules requires the plaintiff to plead particularized facts demonstrating that demand is excused because it would have been futile.
Assessing demand futility requires a judicial examination of the disinterestedness and independence of the members of the board of directors to determine if a majority of the directors may act independently to impartially consider a demand that the corporation proceed adversely to the directors or controller who are the objects of the complaint. In reversing the Court of Chancery’s dismissal of the complaint for failure to plead adequately demand excusal, the Delaware Supreme Court shed new light on the kinds of personal relationships that can cast a reasonable doubt on a director’s impartiality; and stressed the importance for plaintiffs to meet their pleading burden of using pre-suit books and records requests as a tool to investigate facts bearing not only on the wrongdoing at issue, but also on the directors’ independence, as in Sandys v. Pincus, No. 157, 2016 (Del. Supr., Dec. 5).
Background
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]