Delaware Transactional & Corporate Law Update
Delaware Corporation Law Is Amended to Expressly Permit
Coverage of Directors and Officers by Captive Insurers
By John J. Paschetto and Kenneth L. Norton
Delaware law has long permitted a corporation to indemnify its directors, officers, employees, and agents against certain types of losses incurred in proceedings brought “by reason of” their service. To be lawful, the indemnification must meet the standards set forth in Section 145 of the General Corporation Law of the State of Delaware (the “DGCL”)—for example, the indemnitee must have acted in good faith (8 Del. C. § 145(a)-(b)). But the DGCL also permits a corporation to buy insurance to cover losses to directors, officers, employees, and agents, including losses that the corporation itself would be barred from indemnifying.
Involving SPACs Come before the Delaware Court of Chancery
By John J. Paschetto, Lauren M. McCrery, and Sarah M. Hand
Although special purpose acquisition companies (“SPACs”) are not new, deals employing them rose sharply in popularity during 2018-2021.1 A typical SPAC is a shell corporation with publicly traded shares, formed by a “sponsor” for the express purpose of acquiring an as-yet-unidentified target. One of the unusual features of a SPAC is that when the acquisition of a target ultimately occurs (a so-called “de-SPAC transaction”), each of the public stockholders is given the option of cashing out at the original issue price, plus interest, rather than holding shares in the post-SPAC entity.