The (Mis)Application of Section 144
Publication| Corporate Transactions| Corporate & Chancery Litigation
Professor Ernest L. Folk III advocated the enactment of § 144 to validate self-dealing transactions involving directors and officers when those transactions comply with any one of three statutory safeguards. Since its enactment in 1967, however, courts and litigants have created confusion by invoking § 144 in circumstances beyond its narrow scope. As a result, the statutory tests of § 144 have been erroneously intertwined with longstanding common law principles regarding director liability and have eroded the plain meaning of unrelated statutory law.