An oddball legal dispute bouncing around the Delaware Chancery court system has yet again produced another legal precedent that should give pause to corporate directors facing lawsuits.
The court recently decided that, yes, a company can retroactively sever legal protections to directors after they leave the board. In Schoon v. Troy Corp., the court ruled that a company can amend its by-laws and eliminate its obligations to advance legal fees to a director who is sued, as well as eliminate the director’s indemnification—even if the director seeking the advancement had served on the board under the prior by-laws and left the board before the by-laws were amended.
