Charney v. American Apparel, Inc., C.A. No. 11098-CB (September 11, 2015)

Lieberman v. Electrolytic Ozone Inc., C.A. No. 10152-VCN (August 31, 2015)

The Court of Chancery denied advancement to former officers and directors of two Delaware corporations.  These cases make clear that in order to provide advancement both during and after a person’s corporate role has ended, the Certificate of Incorporation or the Bylaws of the corporation must explicitly provide such right.  Further, a corporation may not eliminate the requirement that a person must be entitled to indemnification and/or advancement only if the claim brought is “by reason of” the fact that the person was a corporate official.

Bottom Line: Explicitly identify the persons entitled to advancement in the advancement provisions even if advancement terms are accompanied by terms granting indemnification “to the fullest extent permitted by Delaware law”.