Skadden Discusses Recent Delaware Chancery “Caremark” Decisions

In 1996, the Delaware Court of Chancery issued its seminal decision in In re Caremark International Inc. Derivative Litigation,1 establishing the conditions for director oversight liability under Delaware law. Adopted a decade later by the Delaware Supreme Court in Stone v. Ritter,2 the Caremark test imposes liability under two “prongs”: where “(a) directors utterly failed to implement any reporting or information system or controls; or (b) having implemented such a system or controls, consciously failed to monitor or oversee its operations thus disabling themselves from being informed of risks or problems requiring their attention.”3

In the 25 years since Caremark … Read more