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Court Of Chancery Explains Interest Requirement In Demand Test

Cambridge Retirement System v. James, C.A. No. 9178-CB (June 28, 2014) One way to meet the demand excuse requirement to bring a derivative suit is to show that a majority of the board of directors had a personal interest in the transaction under attack.  But does that interest have to be material to their financial position?  This decision clearly explains that a showing of materiality is NOT required when the directors engaged in self dealing.  On the other hand, such a showing of materiality is required when the transaction is with a third party and does not involve a direct benefit to the directors. Share

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