In the case of Shocking Technologies v. Michael, C.A. No. 7164-VCN (Del. Ch. Apr. 10, 2012), the Delaware Court of Chancery examined whether it has the inherent authority to remove a director for breach of fiduciary duty other than through Section 225 of the Delaware General Corporation Law (“DGCL”).
Section 225 serves as a vehicle through which a shareholder may petition the Court to remove a director from a corporation. To see a prior post regarding Section 225, click here. In this case, however, plaintiff sought to remove the director defendant from the board based not on Section 225, but on the Court’s inherent equitable powers. In opposition, the director defendant asserted that Section 225 serves as the only basis to remove a director, and the prerequisites under that section had not been met because the Court had not yet determined whether defendant had breached a fiduciary duty.
The Court of Chancery did not directly decide the issue of whether it has the authority to remove a director for breach of fiduciary duty other than through Section 225. The Court did indicate, however, that based upon the facts of this case, it was not inclined to exercise such a power. However, the Court ruled that if plaintiff succeeds at trial, and the Court holds that defendant breached his fiduciary duty, then that judgment could provide justification for his removal under Section 225.