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An Introduction to the Law of Corporations: Cases and Materials

Smith v. Van Gorkom

Van Gorkom is a controversial case of the duty of care in the context of a corporate acquisition. In Van Gorkom, the court found that the board had violated its duty of care to the corporation and awarded damages to stockholders. Van Gorkom was the impetus for the adoption of the ยง 102(b)(7)'s exculpation provision. Consequently, the result in Van Gorkom is unlikely to occur again. However, the Van Gorkom case is worth reading because it demonstrates the kinds of director failures that may well rise to the level of a violation of the duty of care.