A Catch-22 or a Catch-All?: Delaware and Texas Grasp for Certainty in Shareholder Ratification


In the wake of corporate calamities such as Enron and World Bank, a renewed interest in corporate law has arisen among legis- lators, judges, lawyers, and businesspeople. Specifically, in the post-Enron corporate environment, corporate management must understand their fiduciary duties to the corporation and the situa- tions in which legal annulment alleviates a breach of these duties. One way directors may avoid litigation for breaching their fiduci- ary duties when involved in self-dealing transactions is by the safety net known as shareholder ratification. Broadly defined, shareholder ratification is “any approval of challenged board ac- tion by a fully informed vote of shareholders, irrespective of whether that shareholder vote is legally required for the transac- tion to attain legal existence.”
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