Corporate Responses to D&O Indemnification Following Schoon v. Troy

The John Liner Review

PUBLISHED ON: April 6, 2009

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The current financial crisis is making corporate directors nervous. However, quitting may not be the right response in many cases, especially since even former directors remain vulnerable on several liability fronts. As shown by the recent Delaware decision in Schoon v. Troy, former directors are vulnerable to retroactive amendments of the by-laws changing or eliminating their indemnification rights.

As a result of the ongoing financial crisis, indemnification provisions in corporate charters and by-laws are under heightened scrutiny. This article discusses the various corporate responses to indemnification of directors and officers following Schoon v. Troy, including the resulting changes in charter and by-law indemnification provisions, the growing adoption of indemnification contracts, and the relationship to directors and officers (D&O) insurance.