Disclosure as Delaware's New Frontier

Abstract

Corporate law, as epitomized by the statutes and common law of the State of Delaware, has painted itself into a corner. Shareholders are too often unprotected — whether it be by statute or through the well-known and articulated fiduciary duties of care, loyalty, or good faith. This Article argues that the least- theorized and utilized fiduciary duty — disclosure or candor — represents the last frontier for corporate law, assuming it retains even a small hope of providing protection for shareholders. My thesis is counter-intuitive; after all, how can a topic that barely merits a footnote in most discussions of corporate law represent a “new frontier” for Delaware?

The argument proceeds in three principal sections. Part I discusses how few protections shareholders actually enjoy in the corporate law canon. Part II tells the story of the most under-theorized and under-utilized fiduciary duty: the duty of disclosure, interchangeably called the duty of candor. Cases remind us that directors perhaps need to disclose information to shareholders, but the duty remains painfully unclear and the case law sparse. How much information? When does this duty kick in? I argue that one must conceptualize a robust duty of disclosure under state law. Part III suggests that notwithstanding these legitimate, and even powerful criticisms, the duty of disclosure under state law is worthy of serious consideration.