Richards Layton & Finger

Did the Delaware Supreme Court Break the 'Directors' Shield'?

August 2007

Credit Lyonnais provided a "shield" to directors against shareholder suits alleging that directors breached their duties to shareholders by acting to protect creditors. Courts around the country have adopted this view, and attorneys have become accustomed to advising boards of directors based on the assumption that this is indeed the law. The Delaware Supreme Court, in North American Catholic Educational Programming Foundation Inc. v. Gheewalla, 2007 Del. LEXIS 227 (Del. Supr. May 18, 2007), might have "broken the shield."