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Compliance Failures And The Resulting Risks For Directors

Law360, New York (December 4, 2017, 1:23 PM EST) -- A Delaware court recently allowed a stockholder’s derivative complaint to proceed where the board of directors allegedly breached their duty of loyalty by knowingly allowing the company to violate a federal regulation. In upholding the complaint, the court examined the company’s prior U.S. Securities and Exchange Commission disclosures describing its business practices to conclude they violated the “plain language” of the regulation. More importantly, the court inferred that the directors knew of the noncompliance, despite the absence of any “red flags” to put the board on...
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