Yesterday, John Jenkins wrote about Delaware's decision to amend Section 102(b)(7) to permit the exculpation corporate officers. Until now, Delaware only permitted the certificate of incorporation to exculpate directors. For Nevada corporations, this is nothing new. NRS 78.138 has for quite some time extended exculpation to corporate officers.
Some significant differences remain, however, between the exculpation provisions of Delaware and Nevada with respect to officers, including:
- For Nevada corporations exculpation is automatic unless the articles or an amendment filed after October 1, 2003 provide otherwise. Existing Delaware corporations wishing to extend exculpation to officers will need to amend their certificates of incorporation.
- Nevada exculpates officers from liability to the corporation unless liability is imposed under specified statutes or unless the business judgement presumption is rebutted and it is proven that the officer’s act or failure to act constituted a breach of his or her fiduciary duties as a director or officer; and the breach involved intentional misconduct, fraud or a knowing violation of law. Delaware significantly limits the scope of exculpation of officers by prohibiting exculpation "in any action by or in the right of the corporation".
- Nevada's exculpation provision extends to all officers. Delaware allows for exculpation only for senior officers authorized to receive service of process under Delaware law.
These are just a few of the more significant differences between Nevada's statute and the recent amendment of Delaware's Section 102(b)(7).
While on the subject of exculpation, I want to re-moot a question that I raised seven years ago: Are the duties of officers subject to the internal affairs doctrine?