Executive Summary
Delaware has shown that the 2025 safe harbor your special committee was built to capture does not close the flank that most often pays the judgment. In Guilbeau v. Footprint, the Court of Chancery let aiding and abetting claims proceed against the funds whose principals sat on the board, on a transaction a special committee had blessed, and noted that the new DGCL safe harbor would not have dismissed those claims even if it had dismissed the directors. For any board with a private equity or strategic investor holding a designated seat, the exposure has moved from the director to the institution behind the director.
The Signal at a Glance
PRIORITY 9 | SILO: JUDICIAL
Chancery held that funds acting through their board designees can be liable for aiding and abetting fiduciary breaches, and that the 2025 DGCL safe harbor does not reach that claim.
The Deep Dive
The Signal
In Guilbeau v. Footprint International Holdco, Inc. (May 11, 2026), Vice Chancellor J. Travis Laster declined to dismiss claims that three institutional funds aided and abetted the breaches of the directors those funds had placed on the board. The directors had approved a 500 million dollar preferred financing, 450 million of it from the funds, while the company verged on insolvency. A three person special committee had recommended the deal.
The court treated the funds and their designees as a single interest. Because each designee was an executive or principal of his fund, the court imputed the designee’s knowledge to the fund and inferred that the designee acted to advance the fund’s plan. The claim, in the court’s words, was that the funds carried out their scheme “with and through their Board designees.”
The Evidence
The case is C.A. No. 2024-0968-JTL. The court found that five of the ten directors faced a disqualifying conflict, which defeated the business judgment rule and put the financing to entire fairness review. The financing carried a 500 million dollar pre-money valuation at a time when the funds’ own bridge loans months earlier had implied one billion, and three competing proposals at higher valuations were disregarded or rejected without documented reasons.
The court was explicit about the 2025 amendments to Section 144 of the Delaware General Corporation Law. Had the safe harbor applied, the fiduciary claims against the directors almost certainly would have been dismissed on the strength of committee approval. The aiding and abetting claims against the funds would not have been. The Delaware legislature’s own synopsis confirms the amendments do not affect aiding and abetting liability.
The court added a holding of first impression: a director who is also a company officer is not independent for a financing essential to the company’s survival, because the financing is essential to his continued employment. That removes one more seat from any clean committee count.
The Strategic Implication
Defensive Risk. The exposed party is the sponsor or strategic investor that holds a designated board seat and staffs it with its own principal, and the audit and nominating committees that approved that structure. What breaks is the assumption that a properly authorized special committee retires the litigation risk on a conflicted transaction. It does not. The safe harbor can clear the directors and leave the institution behind them fully exposed on an aiding and abetting theory, which Chancery is now pleading under a lower knowing participation standard for affiliates than the one the Supreme Court set for third party acquirers in Mindbody and Columbia Pipeline. The move to make before the next conflicted financing or related party transaction reaches the board: have counsel re-paper designated seats and committee mandates so the committee is authorized to say no, not merely to recommend, and so designees are insulated from the appearance of carrying their sponsor’s plan into the boardroom.
Offensive Advantage. The boards that read this correctly will separate the designee from the sponsor before the next deal, not after the complaint. A designee who is independent of the fund’s deal team, a committee with real authority to reject, and a contemporaneous record of why competing proposals were declined together convert the same safe harbor from a false comfort into a genuine shield. The institution that builds that structure now can sponsor rescue financings and related party deals that its less disciplined competitors will be advised to avoid, because it can document that the designee served the company and not the fund.