Richards Layton & Finger

Delaware Supreme Court in Lyondell Decision Updates Duties of Directors in Response to a Takeover

April, 2009

Directors will likely face the most intense scrutiny of their conduct when the board acts in response to a takeover proposal. In Lyondell Chemical Company v. Ryan, the Delaware Supreme Court confirmed important principles regarding both the duties owed by directors, and the standards by which their conduct will be measured. Ever since its adoption in 1986, courts have struggled to define the outer boundaries of the Delaware director liability exoneration provision Section 102(b)(7). As in many instances, the pressure of the facts in a merger case have brought the issue into better focus.