Director Independence Analysis Refined

In a rare reversal of a Chancery Court decision, the Delaware Supreme Court revived a pension fund’s derivative complaint, holding that demand on the board would have been futile.  In a blog post written for the Delaware Journal of Corporate Law, DJCL External Managing Editor Sabrina Hendershot discusses Delaware County Employees Retirement Fund v. Sanchez, where the Court held that a director’s quarter-century friendship and significant business ties supported a pleading-stage inference that the director lacked independence.  Though, this opinion was decided in the context of the defendants’ motion to dismiss, and it is thus still unknown how the Court of Chancery will hold on remand with a more developed record, this opinion serves as an important reminder for boards to be mindful of personal relationships in assessing director independence.


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