Good faith, exculpation (DGCL §102(b)(7)) & D&O basics
Good faith sits inside loyalty. Exculpation, indemnification, and D&O insurance are related tools that often get conflated — boards should know which one they are talking about.
Prepared doesn't make your decisions. It keeps the record that shows how you made them.
Educational only — not legal advice. Details
Fiduciary duties and process standards vary by entity type, charter, bylaws, and jurisdiction. Consult qualified counsel for your board. Using Prepared Board does not ensure business judgment protection, does not prevent liability, and is not a substitute for legal advice, D&O coverage advice, or a fairness opinion.
Good faith
Acts not in good faith — including intentional misconduct, knowing violations of law, or conscious disregard of duties in oversight cases — sit outside the protections that care-only breaches sometimes enjoy.
Disney (2006) and the Caremark line both treat good faith as something proven (or disproven) with process facts, not slogans.
DGCL §102(b)(7) and the 2022 officer amendment
Delaware corporations may adopt a charter provision eliminating or limiting directors’ personal monetary liability for duty-of-care breaches. Loyalty breaches, bad faith, intentional misconduct, knowing violations of law, and improper personal benefits cannot be exculpated.
Effective August 1, 2022, §102(b)(7) was amended to allow similar (but narrower) exculpation for certain officers. Officer exculpation does not cover claims by or in the right of the corporation — including typical derivative claims.
Indemnification and D&O insurance
Indemnification / advancement (bylaws, statute, agreements) and D&O insurance (binder / policy) are separate from exculpation. Boards should know what they approved and what binder they reviewed — without treating a tracker as a coverage opinion.
Prepared Board can record indemnification decisions and a board-declared D&O binder review status. It is not a broker and does not determine coverage.
So what for you as a director
- Know whether your charter has a §102(b)(7) provision (directors and, if adopted, officers).
- Keep indemnification / advancement votes on a register with evidence.
- Review the D&O binder on a calendar; record board-reviewed status.
- Never confuse ‘we have D&O’ with ‘process does not matter.’
What a good record looks like
Mapped to live Prepared Board routes. Counts and process records only — not a finding that duties were met.
- Indemnification register
Tagged indemnification/advancement decisions + evidence gaps.
- D&O binder tracker
Board-declared carrier/expiry/status — not a broker.
- Board proof
Process summary investors and counsel often ask for first.
Verified citations on this page
- DGCL §102(b)(7) — 8 Del. C. § 102(b)(7). Delaware corporations may include a charter provision eliminating or limiting directors’ (and, since the 2022 amendment effective August 1, 2022, certain officers’) personal monetary liability for duty-of-care breaches — but not for loyalty breaches, bad faith, intentional misconduct, knowing violations of law, or improper personal benefits. Officer exculpation does not cover claims by or in the right of the corporation (including typical derivative claims). Source
- In re Walt Disney Co. Derivative Litigation — 906 A.2d 27 (Del. 2006). After trial, the Delaware Supreme Court affirmed that the Disney directors did not breach fiduciary duties or commit waste in connection with Michael Ovitz’s hiring and termination / severance — emphasizing that process evidence matters when good faith and care are challenged. Source
- In re Caremark International Inc. Derivative Litigation — 698 A.2d 959 (Del. Ch. 1996). Chancellor Allen described oversight liability as typically requiring a sustained or systematic failure to exercise oversight — such as an utter failure to attempt to assure a reasonable information and reporting system exists. Source
See a live process record
Open a seeded demo board, then Board proof. Or run the public process-record self-check (gaps only — no score).