The State of Delaware has extended liability protections previously afforded only to directors to officers. Corporations can now file their articles of incorporation with a stipulation to protect their officers from personal monetary liability for breach of fiduciary care claims asserted against them. Certificates of Incorporation filed before this change came into effect can be amended to include these protections.
While the new law allows corporations to eliminate or limit the personal liability of corporate directors and officers to the corporation and stockholders, there are certain instances in which liability cannot be eliminated. These include an officer’s or director’s breach of loyalty to the corporation or its stockholders and intentional acts of omission committed with a knowing violation of the law. Directors are furthermore excluded from these protections for unlawful payments of dividend or stock purchases and transactions aimed at deriving an improper personal benefit, while officers can be held liable for any action by or in the right of the corporation.
The law is not retroactive, meaning officers can still be held personally liable for breach of fiduciary care claims arising before August 1, 2022. Only senior officers, such as the president, CEO, and CFO, as well as other individuals identified in public filings as the company’s most highly compensated officers. Unlike directors, officers are not afforded protections in derivative cases even under the new law.
Delaware joins seven other states—Louisiana, Maryland, Nevada, New Hampshire, New Jersey, Utah, and Virginia—that have extended liability protections to corporate officers in a growing trend aimed at encouraging individuals to serve as corporate officers. The liability protections are not extended automatically, and the appropriate language concerning limitations on the personal liability of directors and/or officers must be included in the articles of incorporation or articles of amendment.
A&M Logos International has had decades of experience working the Corporations Division of the State of Delaware, as well as most other US states. We can help you file the necessary paperwork to register your business or amend your articles of incorporation. We can also help you retrieve certified copies of corporate documents such as certificates of incorporation or amendment and get them apostilled, authenticated, or legalized for use abroad.
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