Smith v. Van Gorkom · Delaware Supreme Court · 1985

Are the directors liable?

Short answer: Yes: they weren't informed.

The facts. Trans Union's CEO arranged to sell the company at a premium. The board approved it after a two-hour meeting, with no written analysis, on a twenty-minute oral presentation. Shareholders sued the directors.

The ruling. Smith v. Van Gorkom (1985): The court held the directors breached their duty of care because they failed to inform themselves.

The ruling shocked boardrooms. Delaware then let companies limit such liability.

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For fun, not legal advice.