In discussing the recent Delaware Chancery Court decision in In Re China Agritech, Inc. Shareholder Derivative Litigation, Kevin Brady notes:
With respect to whether the directors acted in good faith, the Court stated that “[a] Section 102(b)(7) provision can exculpate directors from monetary liability for a breach of the duty of care, but not for conduct that is not in good faith or a breach of the duty of loyalty. The standard for Caremark liability parallels the standard for imposing liability when directors failed to act in good faith.” The Court then gave a “hat tip” to Professor Stephen M. Bainbridge and his article, The Convergence of Good Faith and Oversight, 55 UCLA L. Rev. 559 (2008).
His analysis of the case--especially the implications of the VC's analysis of the sectiopn 220 books and records inspection--is a must read.
