Delaware Business Litigation Report

Court Of Chancery Explains Advancement Agreement

Charney v. American Apparel Inc., C.A. 11098-CB (September 11, 2015)

This decision explains that an advancement agreement that covers a former director for claims “related to the fact” he was a director has the same meaning as the more typical provision providing for advancement for claim arising “by reason of the fact” he was a director.

The opinion is also interesting for its observation that there are limits beyond which a company cannot agree to advance a director's expenses, such as for litigation that arises out of conduct that did not depend on his use of corporate power, such as a tort claim against him for personal injuries.

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