The Delaware Chancery Court ruled in favor of a company in its action brought against a director for breach of the duty of loyalty. The director became disgruntled after his fellow directors rebuffed his attempt to revamp the company's governance system. Shortly thereafter, the director provided the company's funding source with negotiating advice and confidential information regarding the company's bargaining position. In addressing the claim, the court defined the duty of loyalty as an affirmative obligation to protect and advance the interests of a company, which requires a director, acting in good faith, to refrain from any conduct that would harm the company. The director unsuccessfully claimed that his good faith concerns over the company's governance structure justified his conduct with respect to the funding transaction. The court held that the director's good faith concerns did not excuse his conduct.
Shocking Technologies v. Michael, C.A. No. 7164-VCN (Del. Ch. Apr. 10, 2012)