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Lewis H. Lazarus, Morris James

When friends go into business, their ties may fray if the business experiences difficulty and the parties have different views of how to proceed and who is responsible. If the principals are directors of a Delaware corporation, however, their duty of loyalty requires them to eschew self-interest and to do what is best for the corporation and its stakeholders. Moreover, when conflict arises, vague promises among friends do not supplant the requirements for binding agreements. The recent case of CertiSign Holdings v. Kulikovsky, C.A. No. 12055-VCS (Del. Ch., June 7, 2018), well illustrates these principles. The court found after a four-day trial that the defendant had breached his duty of loyalty in refusing to do as a director what was best for the corporation to try to gain leverage in other disputes. The court also found that defendant had failed to establish that the parties had entered into binding agreements regarding the issuance of options and the payment of a debt owed the defendant.

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