EVOLVING D&O LITIGATION
CD: To what extent is litigation risk a rising concern for directors & officers (D&Os) in today’s business world? What factors are making D&Os a target for claims?
Parker: In today’s climate, directors & officers (D&Os) will unfortunately likely face litigation at some point. It may even be after they resign. Stockholders and their counsel remain highly litigious. The stockholder ‘policing mechanism’ can be credited by the court, but it can also be misused. Regardless, the factors making D&Os a target include increasing oversight obligations, the ease of obtaining internal corporate records pre-litigation, the evolving claims against directors in their officer capacity, if any, which may not be exculpated, and increased scrutiny on independence issues.
Mansigani: Litigation risk is a rising concern for D&Os across a range of industries, in particular natural resources, technology and pharmaceuticals. This is affected by factors such as a strengthening litigation funding market, particularly in the US, changes in political and public opinion, and increased regulatory scrutiny and shareholder activism. More generally, litigation risk is of course also on the increase worldwide as many businesses face a difficult economic environment and seek to recover funds, including through litigation, wherever they can. In England and Wales, we saw a continued rise in company insolvencies in the last quarter of 2022, which naturally means increased risks for directors of insolvent companies who may be the target of claims by insolvency practitioners or creditors.
Apr-Jun 2023 issue
Norton Rose Fulbright LLP
Skadden, Arps, Slate, Meagher & Flom LLP