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Court of Chancery Explains Bad Faith Test

Posted In Fiduciary Duty

In Re Chelsea Therapeutics International Ltd. Stockholders Litigation, C.A. 9640-VCG (May 20, 2016)

This decision deals with when the actions of directors may be considered to be in bad faith, at least when there is no self-interest involved and the directors are properly informed before taking the time to decide what to do. The short answer is that the “too stupid to be in good faith” test applies to see if their decision is in bad faith.

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